Question

The current assets and current liabilities sections of the balance sheet of Sunland Co. appear as follows. Cash Accounts receivable Less: Allowance for doubtful accounts Inventory Prepaid expenses Total current assets Sunland Co. Balance Sheet (Partial) As of December 31, 2017 $17,900 Accounts payable $39,600 Notes payable 3,200 36,400 Unearned revenue 61,100 Total current liabilities 7,400 $122,800 $29,500 15,400 3,800 $48,700 The following errors in the corporation's accounting have been discovered: 1. Keane collected $5,200 on December 20, 2017 as a down payment for services to be performed in January, 2018. The company's controller recorded the amount as revenue. 2. The inventory amount reported included $2,300 of merchandise that had been received on December 31, 2017 but for which no purchase invoices had been received or entered. Of this amount, $1,600 had been received on consignment; the remainder was purchased f.o.b. destination, terms 2/10, n/30. 3. Sales for the first day in January 2018 in the amount of $11,100 were entered in the sales journal as of December 31, 2017. Of these, $7,000 were sales on account and the remainder were cash sales. 4. Cash, collected in December 2017, but entered as received in January 2018 totaled $2,400. Of this amount, $2,254 was received on account after cash discounts of 2% had been deducted; the remainder was collected for cash sales. 5. Cash of $4,000 received in January 2018 was entered as received in December 2017. This cash represented the proceeds of a bank loan that matures in July 2018. 6. January 2018 cash disbursements entered as of December 2017 included payments of accounts payable in the amount of $7,000, on which a cash discount of 1% was taken.

Restate the current assets and current liabilities sections of the balance sheet in accordance with good accounting practice.

Answer 1

Solution:

19130 30300 59500 Cash Accounts Receivable Inventory Accounts Payable Notes Payable Unearned Revenue 37200 11400 9000

Workings:

17900 6930 Cash Balance Add: Cash Disbursement for January (7000 - 1%) Cash Collected in December Less: January Sales (11100-7000) Loan Received in January Adjusted Cah Balance 2400 4100 4000 19130 39600 Accounts Receivable Balance Less: January Sales Cash Collected in December (2254*100/98) Adjusted Balance 7000 2300 30300 Inventory Balance Less: Consignment Adjusted Balance 61100 1600 59500 Accounts Payable Balance Add: Purchase invoice omitted (2300-1600) Cash disbursement in Januray Adjusted Balance 29500 700 7000 37200 15400 Notes Payable Balance Less: Loan taken in January Adjusted Balance 4000 11400 Unearned Revenue Balance Add: Down Payment for Services to be performed in Jan Adjusted Balance 3800 5200 9000

19130 30300 SunLand Company Partial Balance Sheet Cash Accounts Receivable Less: Allowance for doubtful debts Inventory Prepaid Expenses Total Current Assets 3200 27100 59500 7400 113130 Current Liabilities Accounts Payable Notes Payable Unearned Revenue Total Current Liabilities 37200 11400 9000 57600

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