Question

Pronghorn Equipment Co. closes its books regularly on December 31, but at the end of 2017 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 $53,800, of which $37,800 represents cash sales, and $16,000 represents collections on account for which cash discounts of $324 were given.

2. January cash disbursements recorded in the December check register liquidated accounts payable of $21,325 on which discounts of $232 were taken.

3. The ledger has not been closed for 2017.

4. The amount shown as inventory was determined by physical count on December 31, 2017. The company uses the periodic method of inventory.

Prepare any entries you consider necessary to correct Pronghorn’s accounts at December 31.

To what extent was Pronghorn 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: (Round ratios to 2 decimal place, e.g. 4.56.)

                                                                  Dr.                                                  Cr.

Cash                                                 $38,740

Accounts receivable                        38,650

Inventory                                           66,480

Accounts payable                                                                                           $45,210

Other current liabilities                                                                                    13,733

                                                                      Per Balance Sheet                                          After Adjustment

Working capital                                             $                                                                        $

Current ratio                                                                              to 1                                                                       to 1

How do we find working capital and current ratio              per balance sheet and         After adjustment

That is all information that I have

Answer 1