Question

Sean Kilpatrick owns the Santos Charcuterie and Bakery. He is assembling a summary of the current asset portion of his balance sheet and has determined the accuracy of the following account balances.Santos Charcuterie and BakeryAccount Account Balance

($)Accounts Receivable: House Accounts 6,200

Allowance for Doubtful House Accounts 1,500

Accounts Receivable: Credit Cards 12,300

Cashiers Banks 5,000

Cash on Deposit in Local Bank 80,200

Food Inventory 17,850

Paper and Supplies Inventory 5,175

Prepaid Expenses 27,950

Use the information he has assembled to determine the proper current assets account balances, listed in their proper order of liquidity, to help Sean determine the total value of his current assets, and then answer the questions that follow

Current Assets

$Cash=

Accounts Receivable Net=

Inventories=

Prepaid Expenses=

Total Current Assets =

a. Why must Sean address the issue of allowances for doubtful house accounts if he is to accurately calculate his total current assets?

b. What are two examples of prepaid expenses Sean may have incurred and thus must address if he is to accurately calculate his total current assets?

Answer 1

a. As the allowance for doubtful accounts represents the uncollectible accounts and the same is deducted from the account receivable

b. The two examples of prepaid expenses involves insurance of the house and the property taxes. And, the prepaid expenses refers to the amount that is paid in advance for the service rendered also it would generate the benefit for the future period so the same is to be imvolved in the current assets side of the balance sheet