60.1K

Verified Solution

Link Copied!

Ceradyne Hamburgers Ltd. (CHL) is a chain of fast-food restaurants. A few years ago, the company decided it didn't want to own any new restaurants. Instead, when a new restaurant opens up, it is owned by a franchisee rather than the company. A franchisee is an individual investor who owns the land, building, furniture, and other assets and operates the restaurant. In return, the franchisee pays CHL a royalty fee, based on a percentage of sales, for the right to use the CHL name and products under a franchise agreement. If the franchisee needs funds to help build the restaurant, they can borrow money from CHL for a one-year period by signing a note receivable to CHL. Selected items from the 2024CHL financial statements along with comparative amounts from 2023 are shown below (in thousands of dollars): Accounts receivable consist only of royalties receivable from franchisees. During 2024, accounts receivable amounting to $90,000 were written off. The notes receivable are from franchisees and are due within one year. During 2024, notes amounting to $1,396,300 were received from new franchise operators and these are still outstanding. Also during 2024, notes of $706,300 were collected in full. A number of notes were dishonoured during the year, but the company's new vice-president of finance believes that all of these will be recoverable. In the past, no dishonoured note has ever been collected. The company's bank requires CHL to maintain a current ratio of 1.5:1. Reconstruct the Allowance for Expected Credit Losses and Notes Receivable accounts

Answer & Explanation Solved by verified expert

See Answer