Professional Simulation The professional simulation for this chapter asks you to address questions related to the accounting for receivables. Prepare responses for all parts.

KWW Professional Simulation Accounting Receivables Time Remaining 2 hours 20 minutes Directions Situation Masurement Financial Statement Analysis Explanation Resour Mike Hom Corporation manufactures sweatshirts for sale to athletic-wear retailers. The following information was available for Hom for the years ended December 31, 2014 and 2015. Cash Accounts receivable Allowance for doubtful accounts Inventory Current liabilities Total credit sales Collections on accounts receivable During 2015, Hom had the following transactions. December 31, December 31, 2014 2015 20,000 15,000 40,000 ? 5,500 ? 85,000 80,000 80,000 86,000 480,000 550,000 440,000 500,000 1. On June 30, sales of 50,000 to a major customer were settled, with Hom accepting a 1-year 50,000 note bearing 11% interest, payable at maturity. 2. Hom factors some accounts receivable at the end of the year. Accounts totaling 40,000 are transferred to First Factors, Inc. without guarantee (recourse). First Factors will receive the collections from Hom's customers and retain 6% of the balances. Hom is assessed a finance charge of 4% on this transfer. 3. On the basis of the latest available information, the 2015 provision for bad debts is estimated to be 0.8% of credit sales. Hom wrote off, as uncollectible, accounts with balances of 2,300. Direction Station Masurement Financial Statement Analysis aplanation sources Based on the above transactions, determine the balance for Accounts Receivable and Allowance for Doubtful Accounts at December 31, 2015. Directions Situation Masurement Financial Statement Analysis Explanation Resources Prepare the current assets section of Hom's statement of financial position at December 31, 2015. The cash balance at December 31, 2015, reflects the following items: checking account 9,600, postage stamps 100, petty cash 300, currency 3,000, and customers' checks (post-dated) 2,000. Direction Station Mesurement Financial Statement Analysis Explanation source Compute the current ratio and the accounts receivable tumover for Hom at December 31, 2015. Use these measures to analyze Hom's liquidity. The accounts receivable tumover in 2014 was 10.37. Directions Situation Masurement Financial Statement Analysis Explanation Discuss how the analysis above would be affected if Hom had transferred the receivables in a secured borrowing transaction.