Question

The current assets and current liabilities sections of the statement of financial position of Monty Corp. are as follows:

MONTY CORP. Statement of Financial Position (partial) December 31, 2020
Cash				$43,000		Accounts payable		$62,000
Accounts receivable		$95,000				Notes payable		68,000
Allowance for doubtful accounts		7,800		87,200
Inventory				186,600
Prepaid expenses				9,500
				$326,300				$130,000

The following errors have been discovered in the corporation’s accounting:

1.		January 2021 cash disbursements that were entered as at December 2020 included payments of accounts payable in the amount of $44,000.
2.		The inventory balance is based on an inventory count that included $31,000 of merchandise that was received at December 31 but with no purchase invoices received or entered. Of this amount, $15,000 was received on consignment; the remainder was purchased f.o.b. destination.
3.		Sales for the first four days of January 2021 in the amount of $31,000 were entered in the sales book as at December 31, 2020. Of these, $23,500 were sales on account and the remainder were cash sales.
4.		Cash, not including cash sales, collected in January 2021 and entered as at December 31, 2020, totalled $40,324. Of this amount, $25,382 was received on account; the remainder was proceeds on a bank loan. (the amount owed to the bank for January 2021 was included as part of the Notes Payable account.)

I can't seem to figure out the adjustments. If you could prove explanations to your steps: it would be appreciated!

Answer 1

1

Cash Disbursment for the year 2021 inculded in accounts Payable of 2020

Cash disbursements is the payments made by a company during a specified period, such as quarter or year

Cash Disbursment for the year 2021 inculded in accounts Payable of 2020

Accounts Payable to be reduced by 18,000(62,000-44,000)

2

Inventory Balance --$31000/FOB Destination & Consignment

Since Goods received to the buyer on consignent & FOB destination, Buyer should record it as purchase

The transfer the title to the goods passes to the buyer as soon as they’ve arrived at the buyer’s location if it is FOB destination.

They should report it as a purchase and as inventory by the buyer

Accounts Payable to be increasd by 31,000

3

Four days sales of 2021 included in December 2020-Accounts Receiable:$23,500 & Cash $7,500

Accounts Receivable to be reduced by 23,500

Cash to be reduced by $7,500

4

Cash $40,324 collected in January 2021 included in December in 2020-included in accounts receivable

$25,382,remainder was proceeds on a bank loan

Accounts Receivable has to be increased by $25,382

Cash has to reduced by $ 40,324

Notes Payable has to be reduced by $14,942(40324-25382)

Amount owed to the bank for January 2021 was included as part of the Notes Payable account