The current assets and liabilities sections of the balance sheet of Allessandro Scarlatti Company appear as follows.

The following errors in the corporation€™s accounting have been discovered:
1. January 2009 cash disbursements entered as of December 2008 included payments of accounts payable in the amount of $39,000, on which a cash discount of 2% was taken.
2. The inventory included $27,000 of merchandise that had been received at December 31 but for which no purchase invoices 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.
3. Sales for the first four days in January 2009 in the amount of $30,000 were entered in the sales book as of December 31, 2008. Of these, $21,500 were sales on account and the remainder were cash sales.
4. Cash, not including cash sales, collected in January 2009 and entered as of December 31, 2008, totaled $35,324. Of this 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 liabilities sections of the balance sheet in accordance with good accounting practice. (Assume that both accounts receivable and accounts payable are recorded gross.)
(b) Determine the net effect of your adjustments on Allesandro Scarlatti Company€™s retained earningsbalance.

Transcribed Image Text:

Debits Credits s ? Cash Office Supplies Prepaid Insurance Equipment Accumulated Depreciation-Equipment Trademarks Accounts Payable Wages Payable Unearned Service Revenue Bonds Payable, due 2015 Common Stock Retained Earnings Service Revenue Wages Expense Insurance Expense Rent Expense Interest Expense 1,200 1,000 48,000 $ 4,000 950 10,000 500 2,000 9.000 10,000 25,000 10,000 9.000 1,400 1,200 900 Total