The current assets and current liabilities sections of the balance sheet of Chas

Question

The current assets and current liabilities sections of the balance sheet of Chase Company appear as follows.

CHASE COMPANY
BALANCE SHEET (PARTIAL)
DECEMBER 31, 2017

The following errors in the corporation’s accounting have been discovered:

Cash, not including cash sales, collected in January 2018 and entered as of December 31, 2017, totaled $36,598. Of this amount, $24,598 was received on account after cash discounts of 2% had been deducted; the remainder represented the proceeds of a bank loan.

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.)

CHASE COMPANY
BALANCE SHEET (PARTIAL)
DECEMBER 31, 2017

Cash $ 40,100 Accounts payable $  59,850 Accounts receivable $89,200 Notes payable 60,600     Less: Allowance for doubtful accounts 8,330 80,870 $120,450 Inventory 161,250 Prepaid expenses 9,400 $291,620

Explanation / Answer

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. Part -1 Cash Balance 40100 Add: Cash disbursment after discount 41500*98% 40670 Less: Credit Sales of January -11190 Less: Cash Collected on Account -24598 Less: Bank Proceeds -12000 Adjusted Cash Balance 32982 Accounts Receivable 89200 Less: Credit Sales of January -19780 Add: Account reduced from Jan Colletion 24598/98% 25100 Adjusted Receivable Balance 94520 Inventory 161250 Less: Inventories received on consignment -12240 Adjusted Inventory Balance 149010 Accounts Payable 59850 Add: Cash Disbursment 41500 Add: Purchase invoice omitted 31670-12240 19430 Adjusted Accounts Payable Balance 120780 Note Payable Balance 60600 Less: Proceeds from Bank Loan -12000 Adjusted Note Payable Balance 48600 Part -2 Balance Sheets after adjustments: Cash 32982 Accounts Payable 120780 Accounts Receivable 94520 Notes Payable 48600 Less: Allowance for doubtful account 8330 86190 Inventory 149010 Prepaid Expense 9400 Total Current Assets 277582 Total Current Liabilities 169380

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