Sandhill Equipment Co. closes its books regularly on December 31, but at the end
ID: 2567617 • Letter: S
Question
Sandhill Equipment Co. closes its books regularly on December 31, but at the end of 2017 it held its cash book open so that a more favorable balance sheet could be prepared for credit purposes. Cash receipts and disbursements for the first 10 days of January were recorded as December transactions. The information is given below.
1. January cash receipts recorded in the December cash book totaled $50,600, of which $31,900 represents cash sales, and $18,700 represents collections on account for which cash discounts of $328 were given.
2. January cash disbursements recorded in the December check register liquidated accounts payable of $22,195 on which discounts of $254 were taken.
3. The ledger has not been closed for 2017.
4. The amount shown as inventory was determined by physical count on December 31, 2017.
The company uses the periodic method of inventory.
Prepare any entries you consider necessary to correct Sandhill’s accounts at December 31. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) No. Date Account Titles and Explanation Debit Credit 1. Dec. 31 2. Dec. 31
To what extent was Sandhill Equipment Co. able to show a more favorable balance sheet at December 31 by holding its cash book open? (Compute working capital and the current ratio.) Assume that the balance sheet that was prepared by the company showed the following amounts: (Round ratios to 2 decimal place, e.g. 4.56.)
Dr.
Cr.
Per Balance Sheet
After Adjustment
Dr.
Cr.
Cash $35,580 Accounts receivable 42,770 Inventory 72,050 Accounts payable $43,100 Other current liabilities 14,257Explanation / Answer
Journal Entries
date
explanation
debit
credit
1-
Accounts receivables
19028
sales
31900
cash
50600
sales discount
328
2-
cash
21941
purchase discount
254
accounts payable
22195
Per balance sheet
After Adjustment
2-
Balance sheet
Debit
credit
debit
credit
cash
35580
6921
Accounts receivables
42770
61798
Inventory
72050
42770
Accounts payable
43100
65295
other current liabilities
14257
14257
total
150400
57357
111489
79552
Working capital = total of current assets -current liabilities
93043
31937
current ratio =current assets/current liabilities
2.622173
1.401461
cash =6921
35580-50600+21941
Accounts payable = 65295
43100+22195
Accounts receivables = 61798
42770+19028
Journal Entries
date
explanation
debit
credit
1-
Accounts receivables
19028
sales
31900
cash
50600
sales discount
328
2-
cash
21941
purchase discount
254
accounts payable
22195
Per balance sheet
After Adjustment
2-
Balance sheet
Debit
credit
debit
credit
cash
35580
6921
Accounts receivables
42770
61798
Inventory
72050
42770
Accounts payable
43100
65295
other current liabilities
14257
14257
total
150400
57357
111489
79552
Working capital = total of current assets -current liabilities
93043
31937
current ratio =current assets/current liabilities
2.622173
1.401461
cash =6921
35580-50600+21941
Accounts payable = 65295
43100+22195
Accounts receivables = 61798
42770+19028
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