Answer:
A. Total Current Assets $286,696
Total current liabilities $140,000
B. Decreaseto retained earnings $58,575.92
Explanation:
A. Calculation to Restate the current assets and current liabilities sections of the balance sheet in accordance with good accounting practices.
ALLESANDRO SCARLATTI COMPANY
Partial Balance Sheet
As of December 2018
CURRENT ASSET
Cash Balance $40,000
Cash disbursement after discount$38,220
(39000*98%)
Less Cash sale in january) ($8,500)
($30000-$21500)
Less Cash collected on account ($23,324)
Less Bank loan proceeds ($12,000)
ADJUSTED CASH $34,396
Add Account Receivable $91,300
Less Allowance for doubtful account ($7,000)
Inventories $159,000
($171,000-$12,000)
Prepaid expense $9,000
TOTAL CURRENT ASSETS $286,696
CURRENT LIABILITIES
Accounts payable $85,000
Notes payable $55,000
($67,000-$12,000)
TOTAL CURRENT LIABILITIES $140,000
b. Calculation to State the net effect of your adjustments on Allessandro Scarlatti Company's retained earnings balance
ADJUSTMENT TO RETAINED EARNINGS STATEMENT
January sales discounts $795.92
($39000/.98*0.02)
Add January sales $30,000
Add January purchase discount $780
($39000*0.02)
Add December purchase $15,000
($27000-$12000)
Add consignment inventory $12,000
Change (decrease) to retained earnings $58,575.92
Therefore The net effect of your adjustments on Allessandro Scarlatti Company's retained earnings balance will be a Decrease to retained earnings of the amount of $58,575.92
Working:
Calculation for ADJUSTED ACCOUNTS RECEIVABLE
Account Receivable balance $89,000
Accounts reduced from january $23,800
collection ($23,324/.98)
Less Account receivable in January ($21,500)
ADJUSTED ACCOUNTS RECEIVABLE $91,300
Calculation for ADJUSTED ACCOUNT PAYABLE
Accounts Payable $61,000
Cash disbursement $39,000
Less Purchase invoice ommitted($15,000)
($27,000-$12000)
ADJUSTED ACCOUNT PAYABLE $85,000
