Question
7-1-DETERMINE PROPER CASH BALANCE Francis Equipment Co. closes its books regularly on December 31, but at the end of 2014 it held its cash book
7-1-DETERMINE PROPER CASH BALANCE
Francis Equipment Co. closes its books regularly on December 31, but at the end of 2014 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.
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The company uses the periodic method of inventory.
Instructions
(a) | Prepare any entries you consider necessary to correct Francis's accounts at December 31. | |||||||||||||||||||
| (b) To what extent was Francis 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:
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