The current assets and current liabilities sections of the balance sheet of Alle

Question

The current assets and current liabilities sections of the balance sheet of Allessandro Scarlatti Company appear as follows

ALLESSANDRO SCARLATTI COMPANY
BALANCE SHEET (PARTIAL)
DECEMBER 31, 2014

Cash 43,230 Accounts payable     66,190

Accounts receivable 91,380 Notes pable 75,050

Less: Allowance for doubtful accounts 8,350 83,030   141,240

Inventory 177,540

Prepaid expenses 9,450

313,250

The following errors in the corporation’s accounting have been discovered:

a1. Calculate the following adjusted balances.

cash

accounts receivable

inventory

accounts payable

notes payable

part b:

accounts receivable balance

add accounts reduced (Jan Collection)

Less Accounts Rcv In Jan

Adjusted Accouns Receivable

Part C:

Inventory

Less Inventory (consignment)

Adjusted Inventory

Part D:

Accounts Payable Balance

Add Cash Disbursements

PUrchase INvoice Omitted

Adjusted Accounts Payable

Part E:

Notes Payable Balance

Less Proceeds of Bank Loan

Adjusted Notes Payable

1. January 2015 cash disbursements entered as of December 2014 included payments of accounts payable in the amount of $41,600, on which a cash discount of 2% was taken. 2. The inventory included $27,100 of merchandise that had been received at December 31 but for which no purchase invoices had been received or entered. Of this amount, $11,500 had been received on consignment; the remainder was purchased f.o.b. destination, terms 2/10, n/30. 3. Sales for the first four days in January 2015 in the amount of $34,390 were entered in the sales journal as of December 31, 2014. Of these, $23,730 were sales on account and the remainder were cash sales. 4. Cash, not including cash sales, collected in January 2015 and entered as of December 31, 2014, totaled $35,784. Of this amount, $25,284 was received on account after cash discounts of 2% had been deducted; the remainder represented the proceeds of a bank loan

Explanation / Answer

Adjusted journal entries:

a1. Calculate the following adjusted balances.

cash = 43230 + 40768 - 11500 -10640 + 35784 = $97642

accounts receivable = 91380 -23750 -25800 = $41830

inventory = 177540 + 27100 = $204640

accounts payable = 66190 - 41600 + 15600 = $40190

notes payable = 75050 - 9984 = $65066

part b:

accounts receivable balance = 91380

add accounts reduced (Jan Collection) = 23750

Less Accounts Rcv In Jan = 25800

Adjusted Accouns Receivable= $88330

Part C:

Inventory = $177540

Less Inventory (consignment)=$27100

Adjusted Inventory = $150440

Part D:

Accounts Payable Balance =$66190

Add Cash Disbursements = 41600

PUrchase INvoice Omitted = 27100

Adjusted Accounts Payable = $134890

Part E:

Notes Payable Balance $75050

Less Proceeds of Bank Loan= $9984

Adjusted Notes Payable=$65066

Accounts Title and explanation Debit $ Credit $ Accounts Payable 41600 Cash 40768 Cash Discount 832 (to be entered in december) Inventory 27100 Cash 11500 Accounts Payable 15600 (to be entered in december) Sales 34390 Cash 10640 Accounts Receivable 23750 (reversal of January sales booked in December) Cash 35784 Accounts Receivable 25800 Bank Loan 9984 (to be entered in december)

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