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(Answered) Current Assets and Current Liabilities


E5-9 (Current Assets and Current Liabilities) 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, 2007;Cash $ 40,000 Accounts payable $ 61,000;Accounts receivable $89,000 Notes payable 67,000;Less: Allowance for $128,000;doubtful accounts 7,000 82,000;Inventories 171,000;Prepaid expenses 9,000;$302,000;234? Chapter 5 Balance Sheet and Statement of Cash Flows;(L0 3);(L0 2);(L0 2;3);Exercises? 235;The following errors in the corporation's accounting have been discovered;1. January 2008 cash disbursements entered as of December 2007 included payments of accounts;payable in the amount of $39,000, on which a cash discount of 2% was taken.;2. 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, $12,000 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 2008 in the amount of $30,000 were entered in the sales book;as of December 31, 2007. Of these, $21,500 were sales on account and the remainder were cash;sales.;4. Cash, not including cash sales, collected in January 2008 and entered as of December 31, 2007;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.;Instructions;(a) Restate the current assets and current liabilities sections of the balance sheet in accordance with;good accounting practice. (Assume that both accounts receivable and accounts payable are;recorded gross.);(b) State the net effect of your adjustments on Allesandro Scarlatti Company's retained earnings;balance.;Attachments;e5-9.doc
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Current Assets and Current Liabilities

 


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