AC 302 CHAPTER 7 PROBLEM QUESTION 1

AC 302 CHAPTER 7 PROBLEM QUESTION 1
Name				Date		
Instructor				Course		
Intermediate Accounting 14th Edition by Kieso Weygandt and Warfield						
Primer on Using Excel in Accounting by Rex A Schildhouse						
						
P7-1 (Determine Proper Cash Balance) Francis Equipment Co. closes its books regularly on December 31, but at the end of 2012 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					$45,640 	, of which
$28,000 	represents cash sales, and		$17,640 	represents collections on account for		
which cash discounts of		$360 	were given.			
2. January cash disbursements recorded in the December check register liquidated accounts payable						
of	$22,450 	on which discounts of		$250 	were taken.	
3. The ledger has not been closed for 2012.						
4. The amount shown as inventory was determined by physical count on December 31, 2012.						
The company uses the periodic method of inventory.						
Instructions:						
(a) Prepare any entries you consider necessary to correct Francis- accounts at December 31.						
						
Dec 31, 12	Account Title				Amount	
	Account Title				Amount	
	Account Title					Amount
	Account Title					Amount
						
Dec 31, 12	Account Title				Amount	
	Account Title				Amount	
	Account Title					Amount
						
						
"(b) To what extent was Francis 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:"						
						
						
			Per Balance Sheet		After Adjustment	
	Current assets		Debit	Credit	Debit	Credit
	Cash		$39,000 		Amount	
	Receivables		42,000 		Amount	
	Inventories		67,000 		Amount	
	Totals:		$148,000 		Formula	
						
	Current Liabilities					
	Accounts Payable			$45,000 		Amount
	Other Current Liabilities			14,200 		Amount
	Totals:			$59,200 		Formula
	Working capital			Formula		Formula
						
	Current ratio:		Formula	to 1	Formula	to 1