EXERCISES FOR CHAP.4 1. The current assets and current liabilities sections of the balance sheet of Allessandro Scarlatti Company appear as follows. Cash Accounts receivable Less: Allowance for doubtful accounts ALLESSANDRO SCARLATTI COMPANY BALANCE SHEET (PARTIAL) DECEMBER 31, 2017 $40,000 $89,000 Accounts payable $61,000 Notes payable 67,000 $128.000 7,000 82,000 171,000 Inventories Prepaid expenses 9.000 $302.000 The following errors in the corporation's accounting have been discovered: 1. January 2018 cash disbursements entered as of December 2017 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 2018 in the amount of $30,000 were entered in the sales book as of December 31, 2017. Of these, $21,500 were sales on account and the remainder were cash sales. 4. Cash, not including cash sales, collected in January 2008 and entered as of December 31, 2017, 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 current liabilities sections of the balance sheet in accordance with good accounting practice. (Assume that both accounts receivable and accounts payable are recorded gross.) (b) State the net effect of your adjustments on Allesandro Scarlatti Company's retained earnings balance.