Question

Chamberlain Enterprises Inc. reported the following receivables in its December 31, 2021, year-end balance sheet: Current assets: Accounts receivable, net of $43,000 in allowance for uncollectible accounts Interest receivable Notes receivable $313,000 16, 10e 450, eee Additional Information: 1 The notes receivable account consists of two notes, a $95.000 note and a $355.000 note. The $95.000 note is dated October 31 2021 with principal and interest payable on October 31, 2022. The $355.000 note is dated June 30, 2021. with principal and 8% interest payable on June 30, 2022. 2. During 2022, sales revenue totaled $1,530,000, $1,375,000 cash was collected from customers, and $41,000 in accounts receivable were written off. All sales are made on a credit basis. Bad debt expense is recorded at year-end by adjusting the allowance account to an amount equal to 10% of year-end accounts receivable. 3. On March 31, 2022. the $355,000 note receivable was discounted at the Bank of Commerce. The bank's discount rate is 10% Chamberlain accounts for the discounting as a sale. Required: 1. In addition to sales revenue, what revenue and expense amounts related to receivables will appear in Chamberlain's 2022 income statement? 2. & 3. What amounts will appear in the 2022 year-end balance sheet for accounts receivable and Calculate the receivables turnover ratio for 2022

Answer 1

Ques 1
Interest revenue
$355000 note:$355000*8%*3/12	$                  7,100
$95000 note:$95000*12%*10/12	$                  9,500
total interest revenue	$                16,600
Interest on 85000 note can be determined as follows
Interest receivable dec-31 balance sheet	$                16,100
Less:interest on $355000 note:$355000*8%*6/12	$             (14,200)
Interest on $95000 note	$                  1,900
so $1900 represents interest for two months
so monthly interest will be ($1900/2)=	$                      950	per month
Annual interest ($950*12)	$                11,400
Interest rate(11400/95000)	12%
Bad debt expense
Beginning Accounts receivable(313000+43000)	$             356,000
Add:credit sales	$          1,530,000
less:cash collections	$       (1,375,000)
Less:write offs	$             (41,000)
Ending accounts receivable	$             470,000
Analysis of allowance for uncollectible accounts
Beginning balance	$             (43,000)
write off	$                41,000
ending balance(470000*10%)	$                47,000
Bad debt expense	$                45,000
Loss on sale of notes receivable
Interest accrued on the $255000 notes for nine months (june 30th to 31/3/2019)
$355000*8%*9/12=	$                21,300
Calculation of cash proceeds received from discounting note
Face value	$             355,000
Interest to maturity(355000*8%)	$                28,400
Maturity value	$             383,400
Discount($383400*10%*3/12)	$                (9,585)
Cash proceeds	$             373,815
Carrying value of notes(355000+21300)	$             376,300
Less:cash proceeds	$           (373,815)
Losson sale of notes receivable	$                  2,485
So we show three amounts
Revenues
Interest revenue	$                16,600
Expense
Bad debt expense	$                45,000
Loss on sale of notes receivable	$                  2,485
Ques 2
Accounts receivable ,net(470000-47000)	$             423,000
Ques 3
Average accounts receivable(313000+423000)/2(b)	$             368,000
Credit sales(a)	$          1,530,000
Receivables turnover(a/b)	4.2	times