Cordova, Inc., reported the following receivables in its
December 31, 2020, year-end balance sheet:
Current assets: | |||
Accounts receivable, net of $45,000 in allowance for uncollectible accounts |
$ | 377,000 | |
Interest receivable | 15,000 | ||
Notes receivable | 350,000 | ||
Additional information:
Required:
1. In addition to sales revenue, what revenue and
expense amounts related to receivables will appear in Cordova’s
2021 income statement?
2. Calculate the receivables turnover ratio for
2021. (Round your answer to 2 decimal places.)
|
1.
In addition to sales revenue, Interest revenue and bad debt expense
will be recorded on income statement
2.
i) Interest Revenue = $120000 x 6% x 10/12 + 230000 x 8% x 3/12 =
$10600
Accounts Receivable Balance = ($377000+45000) + 2050000 -
1910000 - 34000 = $528000
Bad Debt Expense = $528000 x 10% - (45000-34000) = $41800
Accounts Receivable, Net = $528000 - 41800 = $486200
ii) Accounts Receivable Turnover Ratio = Sales Revenue / Average
Accounts Receivable
= $2050000 / 431600 = 4.75 times (Using net receivables)
it can also be = $2050000 / 475000 = 4.32 times (Using gross receivables)
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