The current assets and current liabilities sections of the balance sheet of Sunland Co. appear as follows. Sunland Co. Balance Sheet (Partial) As of December 31, 2017 Cash $ 17,900 Accounts payable $ 29,500 Accounts receivable $ 39,600 Notes payable 15,400 Less: Allowance for doubtful accounts 3,200 36,400 Unearned revenue 3,800 Inventory 61,100 Total current liabilities $ 48,700 Prepaid expenses 7,400 Total current assets $ 122,800 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.

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

The current assets and current liabilities sections of the balance sheet of Sunland Co. appear as follows.

Sunland Co. Balance Sheet (Partial) As of December 31, 2017
Cash		$ 17,900	Accounts payable	$ 29,500
Accounts receivable	$ 39,600		Notes payable	15,400
Less: Allowance for doubtful accounts	3,200	36,400	Unearned revenue	3,800
Inventory		61,100	Total current liabilities	$ 48,700
Prepaid expenses		7,400
Total current assets		$ 122,800

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.