(a) Allessandro Scarlatti Company

Balance Sheet (Partial)

31-Dec-14
Current assets
Cash
Accounts receivable
Less: Allowance for doubtful
accounts
Inventory
Prepaid expenses
Total current assets

* Cash balance

Add: Cash disbursement after discount

($39,000 X 98%)

Less: Cash sales in January ($30,000 – $21,500)

Cash collected on account

Bank loan proceeds ($35,324 – $23,324)

Adjusted cash

** Accounts receivable balance

Add: Accounts reduced from January collection

($23,324 ÷ 98%)
 Deduct: Accounts receivable in January

Adjusted accounts receivable

*** Inventory

Less: Inventory received on consignment

Adjusted inventory
 Current liabilities
Accounts payable $115,000a
Notes payable 55,000b
Total current liabilities $170,000

a
Accounts payable balance $61,000
Add: Cash disbursements $39,000
Purchase invoice omitted
($27,000 – $12,000) 15,000 54,000
Adjusted accounts payable $115,000

b
Notes payable balance $67,000
Less: Proceeds of bank loan 12,000
Adjusted notes payable $55,000

(b) Adjustment to retained earnings balance:

Add: January sales discounts
[($23,324 ÷ 98%) X .02] $476
Deduct: January sales $30,000
January purchase discounts
($39,000 X 2%) 780
December purchases 15,000
Consignment inventory 12,000 -57,780
Change (decrease) to retained earnings ($57,304)
l)

$ 34,396*
$ 91,300**

7,000 84,300
159,000***
9,000
$286,696

$40,000

38,220

78,220

-8,500

-23,324

-12,000

$34,396

$89,000

23,800
112,800
 -21,500

$91,300

$171,000

12,000

$159,000