Question

Exercise 5-9 The current assets and current liabilities sections of the balance sheet of Marigold Company appear as follows. MARIGOLD COMPANY BALANCE SHEET (PARTIAL) DECEMBER 31, 2020 Cash $ 47,800 Accounts receivable $91,000 Less: Allowance for doubtful accounts 7,810 83,190 Inventory 175,740 Prepaid expenses 9,770 $316,500 Accounts payable Notes payable $ 64,720 67,890 $132,610 The following errors in the corporation's accounting have been discovered: 1. January 2021 cash disbursements entered as of December 2020 included payments of accounts payable in the amount of $44,100, on which a cash discount of 2% was taken. 2. 3. The inventory included $30,240 of merchandise that had been received at December 31 but for which no purchase invoices had been received or entered. Of this amount, $10,320 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 2021 in the amount of $31,880 were entered in the sales journal as of December 31, 2020. Of these, $22,420 were sales on account and the remainder were cash sales. Cash, not including cash sales, collected in January 2021 and entered as of December 31, 2020, totaled $34,932. Of this amount, $22,932 was received on account after cash discounts of 2% had been deducted; the remainder represented the proceeds of a bank loan. 4.

Answer 1

Cash		$ $1582110508549_blob.png$46626
Accounts Receivable		$ $1582110508541_blob.png$91980
Inventory		$ $1582110509076_blob.png$165420
Accounts Payable		$ $1582110508605_blob.png$128740
Notes Payable		$ $1582110508619_blob.png$55890

Exercise 5-9 (Part Level Submission)

Cash balance		$47,800
Add:	Cash disbursement after discount [$44,100 x 98%]		43,218
			91,018
Less:	Cash sales in January ($31,880 – $22,420)		(9,460	)
	Cash collected on account		(22,932	)
	Bank loan proceeds ($34,932 – $22,932)		(12,000	)
Adjusted cash		$46,626

Accounts receivable balance		$91,000
Add: Accounts reduced from January collection ($22,932 ÷ 98%)		23,400
		114,400
Deduct: Accounts receivable in January		(22,420	)
Adjusted accounts receivable		$91,980

Inventory		$175,740
Less: Inventory received on consignment		10,320
Adjusted inventory		$165,420

Accounts payable balance				$64,720
Add:	Cash disbursements		$44,100
	Purchase invoice omitted ($30,240 – $10,320)		19,920		64,020
Adjusted accounts payable				$128,740
Notes payable balance				$67,890
Less:	Proceeds of bank loan				12,000
Adjusted notes payable				$55,890

$1582110508592_blob.png$

(a2)

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	Your answer is correct.

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.) (List Current Assets in order of liquidity.)

Balance Sheet (Partial) $1582110508610_blob.png$December 31, 2017For the Year Ended December 31, 2017For the Quarter Ended December 31, 2017EAT_1414587029175_1_6399117993832366
Asset
$1582110508656_blob.png$Current Assets
$1582110508864_blob.png$Cash			$ $1582110508671_blob.png$46626
$1582110508756_blob.png$Accounts Receivable	$ $1582110509073_blob.png$91980
$1582110509317_blob.png$      Less: $1582110508752_blob.png$Allowance for Doubtful Accounts	$1582110509372_blob.png$7,810		$1582110508780_blob.png$84170
$1582110509220_blob.png$Inventory			$1582110508784_blob.png$165420
$1582110508742_blob.png$Prepaid Expenses			$1582110508854_blob.png$9770
$1582110508668_blob.png$ Total Current Assets			$ $1582110508875_blob.png$305986
Liabilities and Stockholders' Equity
$1582110508699_blob.png$Current Liabilities
$1582110508873_blob.png$Accounts Payable			$ $1582110508777_blob.png$128740
$1582110508851_blob.png$Notes Payable			$1582110508750_blob.png$55890
$1582110509063_blob.png$ Total Current Liabilities			$$1582110508787_blob.png$184630

State the net effect of your adjustments on Company’s retained earnings balance.

$1582110508745_blob.png$Decrease to retained earnings		$ $1582110509037_blob.png$62534
Adjustment to retained earnings balance:
Add:	January sales discounts [($22,932 ÷ 98%) x 0.02]				$      468
Deduct:	January sales		$31,880
	January purchase discounts ($44,100 x 2%)		882
	December purchases		19,920
	Consignment inventory		10,320		(63,002	)
Change (decrease) to retained earnings				$(62,534	)