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5-9 (L02,3) (Current Assets and Current Liabilities) The current assets and current liabilities sections of the balance sheet Allessandro Scarlatti Company appear as follows. ALLESSANDRO SCARLATTI COMPANY BALANCE SHEET (PARTIAL) DECEMBER 31, 2017 Cash Accounts receivable 40,000 Accounts payable 61,000 67,000 $128,000 $89,000 Notes payable Less: Allowance for doubtful accounts 82,000 171,000 9,000 $302,000 7,000 Inventory Prepaid expenses 244 Chapter 5 Balance Sheet and Statement of Cash Flows The following errors in the corporation's accounting have been discovered: 1. January 2018 cash disbursements entered as of December 2017 Included payments of accounts payable in the am 2. The inventory included $27,000 of merchandise that had been received at December 31 but for which no purchase invoices 3. Sales for the first four days in January 2018 in the amount of $30,000 were entered in the sales journal as of December 31, 4. Cash, not including cash sales, collected in January 2018 and entered as of December 31, 2017, totaled $35,324. Of this $39,000, on which a cash discount of 2% was taken. had been received or entered. Of this amount, $12,000 had been received on consignment: the remainder was purchased f.o.b. destination, terms 2/10, n/30. 2017. Of these, $21,500 were sales on account and the remainder were cash sales. amount, $23,324 was received on account after cash discounts of 2% had been deducted, the remainder represented the proceeds of a bank loan. Instructions (a) 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.) (b) State the net effect of your adjustments on Allessandro Scarlatti Company's retained earnings balance. E5-10 (LO2,3) (Current Liabilities) Normn Smith

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