The following information was available for Burneys Consulting Services for the years ended December 31, 2016 and
Question:
The following information was available for Burney’s Consulting Services for the years ended December 31, 2016 and 2017.
| | December 31, 2016 | December 31, 2017 |
| Cash | $ 2,000 | $ 1,685 |
| Accounts receivable | 46,000 | ? |
| Allowance for doubtful accounts | 550 | ? |
| Other current assets | 8,500 | 7,925 |
| Current liabilities | 37,000 | 44,600 |
| Total credit sales | 205,000 | 255,000 |
| Collections on accounts receivable | 190,000 | 228,000 |
Burney’s Management is preparing for a meeting with its bank concerning renewal of a loan and has collected the following information related to the above balances.
1.The cash reported at December 31, 2017, reflects the following items: petty cash $1,575 and postage stamps $110. The other current assets balance at December 31, 2017, includes the checking account balance of $4,000.
2.On November 30, 2017, Burney’s agreed to accept a 6-month, $5,000 note bearing 12% interest, payable at maturity, from a major client in settlement of a $5,000 bill. The above balances do not reflect this transaction.
3.Burneys factored some accounts receivable at the end of 2017. It transferred accounts totaling $10,000 to Final Factor, Inc. with recourse. Final Factor will receive the collections from Burney's customers and will retain 2% of the balances. Final Factor assesses Burney a finance charge of 3% on this transfer. The fair value of the recourse liability is $400. The transaction related to the factoring has not been recorded.
4.Burney charged off uncollectible accounts with balances of $1,600. On the basis of the latest available information, the 2017 provision for bad debts is estimated to be 2.5% of accounts receivable.
Expert Answer:
SNo Particulars Amount 1 a Cash 168500 Adjustment Minus postage stamps 11000 Add Balance in the checking account 400000 Revised balance 557500 1 b Oth... View the full answer
