Question

The current assets and current liabilities sections of the balance sheet of Wildhorse Co. appear as follows. Wildhorse Co. Balance Sheet (Partial) As of December 31, 2017 Cash $18,800 Accounts payable $28,300 Accounts receivable $39,500 Notes payable 13,600     Less: Allowance for doubtful accounts 2,200 37,300 Unearned revenue 2,500 Inventory 61,500 Total current liabilities $44,400 Prepaid expenses 5,100 Total current assets $122,700 The following errors in the corporation’s accounting have been discovered: 1. Keane collected $4,400 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 $3,500 of merchandise that had been received on December 31, 2017 but for which no purchase invoices had been received or entered. Of this amount, $1,900 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 $12,300 were entered in the sales journal as of December 31, 2017. Of these, $5,600 were sales on account and the remainder were cash sales. 4. Cash, collected in December 2017, but entered as received in January 2018 totaled $4,000. Of this amount, $3,332 was received on account after cash discounts of 2% had been deducted; the remainder was collected for cash sales. 5. Cash of $4,500 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 $6,800, on which a cash discount of 1% was taken.

(a1) Calculate the following adjusted balances. Cash $ Accounts Receivable $ Inventory $ Accounts Payable $ Notes Payable $ Unearned Revenue $

Answer 1

(al) Cash: Calculate the adjusted balance of cash as shown below: Details Error Number Amount Unadjusted cash balance Add: Cash received on account after cash discounts Add: Wrong posting of cash disbursement to accounts payable $6,800-($6.800 196) Total Less: Wrong posting of cash sales S12,300 -$5,600 Less: Wrong posting of receipt of cash representing Adjusted balance ofc $18,800 $4,000 $6.732 $29,532 $6,700 ceeds of loan $4.500 $18,332 ash Thus, the adjusted balance of cash is S18,332 Accounts Receivable: Calculate the adjusted balance of accounts receivable as shown below: Details Error Number Amount Unadiusted accounts receivable balance Less: Wrong posting of credit sales Less: Receipt of cash on account after discount S3,332 x [100 (100 2) Adjusted balance of accounts receivable S39,500 $5,600 $3.400 S30.500 4 Thus, the adjusted balance of accounts receivable is S30,500

Inventory: Calculate the adjusted balance of inventory as shown below: Details Error Number Amount Unadjusted inventory balance Less: Inventory received on consignment Adjusted balance of inventor $61,500 $1.900 59.600 Thus, the adjusted balance of inventory is S59, 600 Accounts Pavable: Calculate the adjusted balance of accounts payable as shown below: Details Error Number Amount Unadjusted accounts payable balance Add: Purchase of inventory on account [$3.500 $1.900 Add: Wrong posting of cash disbursement to accounts payable Adiusted balance of accounts pavable $28,300 $1.600 $6.800 36.700 Thus, the adjusted balance of accounts payable is $36, 700 Notes Pavable: Calculate the adjusted balance of notes payable as shown below: Details Error Number Amount Unadjusted notes payable balance Less: Wrong posting of receipt of cash Adjusted balance of notes payvable $13,600 $4.500 9.10 senting proceeds of loan Thus, the adjusted balance of notes payable is $9,100

Unearned Revenue: Calculate the adjusted balance of unearned revenue as shown below Error Number Amount $2,500 $4.400 $6,900 Details Unadjusted unearned revenue balance Add: Receipt of down payment for services to be performed1 Adjusted balance of unearned revenue Thus, the adjusted balance of unearned revenue is 6,900