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Francis EquipmentCo. closes its books regularly on December

    Francis EquipmentCo. closes its books regularly on December 31, but at the end of 2014 it heldits cash book open so that a more favorable balance sheet could be prepared forcredit purposes. Cash receipts and disbursements for the first 10 days of Januarywere recorded as December transactions. The information is given below.1. January cash receipts recorded in theDecember cash book totaled $45,640, of which $28,000 represents cash sales,and $17,640 represents collections on account for which cash discounts of $360were given.2. January cash disbursements recorded inthe December check register liquidated accounts payable of $22,450 on whichdiscounts of $250 were taken.3. The ledger has not been closed for2014.4. The amount shown as inventory wasdetermined by physical count on December 31, 2014.Thecompany uses the periodic method of inventory.Instructions(a) Prepare any entries you considernecessary to correct Francis’s accounts at December 31.(b) To what extent was Francis Equipment Co. able to show a morefavorable balance sheet at December 31 by holding its cash book open?(Compute working capital and the current ratio.) Assume that thebalance sheet that was prepared by the company showed the followingamounts:Francis EquipmentCo. closes its books regularly on December 31, but at the end of 2014 it heldits cash book open so that a more favorable balance sheet could be prepared forcredit purposes. Cash receipts and disbursements for the first 10 days of Januarywere recorded as December transactions. The information is given below.1. January cash receipts recorded in theDecember cash book totaled $45,640, of which $28,000 represents cash sales,and $17,640 represents collections on account for which cash discounts of $360were given.2. January cash disbursements recorded inthe December check register liquidated accounts payable of $22,450 on whichdiscounts of $250 were taken.3. The ledger has not been closed for2014.4. The amount shown as inventory wasdetermined by physical count on December 31, 2014.Thecompany uses the periodic method of inventory.Instructions(a) Prepare any entries you considernecessary to correct Francis’s accounts at December 31.(b) To what extent was Francis Equipment Co. able to show a morefavorable balance sheet at December 31 by holding its cash book open?(Compute working capital and the current ratio.) Assume that thebalance sheet that was prepared by the company showed the followingamounts:DR                   CRCASH                                                                        $39,000ACCOUNTS RECEIVABLE                                       42,000INVENTORY                                                               67,00ACCOUNTS PAYABLE                                                                       $45,000OTHER CURRENT LIABILITIES                                                           14,200

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