Question

Please follow the format as shown. The list of accounts are included at the bottom.

Exercise 5-9 The current assets and current liabilities sections of the balance sheet of Tamarisk Company appear as follows. TAMARISK COMPANY BALANCE SHEET (PARTIAL) DECEMBER 31, 2020 Cash $ 48,700 Accounts receivable $92,700 Less: Allowance for doubtful accounts 7,640 85,060 Inventory 183,410 Prepaid expenses 8,130 $325,300 Accounts payable Notes payable $ 57,640 61,270 $118,910 The following errors in the corporation's accounting have been discovered: 1. 2. January 2021 cash disbursements entered as of December 2020 included payments of accounts payable in the amount of $43,800, on which a cash discount of 2% was taken. The inventory included $30,800 of merchandise that had been received at December 31 but for which no purchase invoices had been received or entered. Of this amount, $12,110 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 $32,000 were entered in the sales journal as of December 31, 2020. Of these, $20,030 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 $34,834. Of this amount, $22,834 was received on account after cash discounts of 2% had been deducted; the remainder represented the proceeds of a bank loan. 3. 4. Calculate the following adjusted balances. Cash Accounts Receivable Inventory $ Accounts Payable $

Answer 1

1. Calculation of Adjusted Balances.

Cash balance	48,700
Add: Cash disbursement after discount ($43,800 x (1 -2%)	42,924
	91,624
Less:Cash sales in January ($32,000 – $20,030)	(11,970)
Less:Cash collected on account	(22,834)
Less:Bank loan proceeds ($34,834 – $22,834)	(12,000)
Adjusted cash	44,820

Accounts receivable balance	92,700
Add: Accounts reduced from January collection (22,834 / 98%)	23,300
Less: Accounts receivable in January	(20,030)
Adjusted accounts receivable	95,970

Inventory balance	183,410
Less: Inventory received on consignment	12,110
Adjusted inventory	195,520

Accounts payable balance	57,640
Add: Cash disbursements	43,800
Add: Purchase invoice omitted  ($30,800– $12,110)	18,690
Adjusted accounts payable	120,130

Notes payable balance	61,270
Less: Proceeds of bank loan ($34,834 – $22,834)	(12,000)
Adjusted notes payable	49,270

2. Balance Sheet

TAMARISK COMPANY
Balance Sheet (Partial)
December 31 2020
Assets
Current assets
Cash		44,820
Accounts receivable	95,970
Less: Allowance for doubtful Accounts	7,640	88,330
Inventory		195,520
Prepaid expenses		8,130
Total current assets		336,800
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable		120,130
Notes payable		49,270
Total current liabilities		169,400

3.Net effect on Tamarisk companys retained earnings

Adjustment to retained earnings balance:
Add: January sales discounts  [(22,834 / 98%) X 2%]		466
Less: January sales	32,000
Less: January purchase discounts (43,800 x 2%)	876
Less: December purchases ($30,800– $12,110)	18,690
Less: Consignment inventory	12,110	(63,676)
Decrease to retained earnings		(63,210)