The current assets and liabilities sections of the balance sheet of Agincourt Co
ID: 2435412 • Letter: T
Question
The current assets and liabilities sections of the balance sheet of Agincourt Company appear as follows.
AGINCOURT COMPANY
Balance Sheet (Partial)
December 31, 2010
Cash $40,000 Accounts payable $61,000
Accounts receivable $89,000 Notes payable 67,000
Less: Allowance for doubtful accounts 7,000
82,000 $128,000
Inventories 171,000
Prepaid expenses 9,000
$302,000
The following errors in the corporation's accounting have been discovered:
January 2011 cash disbursements entered as of December 2010 included payments of accounts payable in the amount of $35,000, on which a cash discount of 2% was taken.
The inventory included $27,000 of merchandise that had been received at December 31 but for which no purchase invoices had been received or entered. Of this amount, $10,000 had been received on consignment; the remainder was purchased f.o.b. destination, terms 2/10, n/30.
Sales for the first four days in January 2011 in the amount of $30,000 were entered in the sales book as of December 31, 2010. Of these, $21,500 were sales on account and the remainder were cash sales.
Cash, not including cash sales, collected in January 2011 and entered as of December 31, 2010, totaled $35,324. Of this amount, $23,324 was received on account after cash discounts of 2% had been deducted; the remainder represented the proceeds of a bank loan.
(a) Restate the current assets and liabilities sections of the balance sheet in accordance with good accounting practice. (Assume that both accounts receivable and accounts payable are recorded gross.) (List current liabilities with notes payable first.)
(b) State the net effect of your adjustments on Agincourt Company's retained earnings balance.
Explanation / Answer
(a )
(b)
Working :
Current Assets :
Cash 31176 Accounts Receivable 105800 Inventories 144000
Current Liabilities :
Acccounts Payable 96000 Notes Payable 55000
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