The following information was available for Burney’s

The following information was available for Burney’s Consulting Services for the years ended December 31, 2016 and 2017.

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.