P7-1 (Dete+B7:H53rmine 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. 1. January cash receipts recorded in the December cash book totaled $45,640 , of which $28,000 represents cash sales, and $17,640 represents collections on account for which cash discounts of $360 were given. 2. January cash disbursements recorded in the December check register liquidated accounts payable of $22,450 on which discounts of $250 were taken. 3. The ledger has not been closed for 2014. 4. The amount shown as inventory was determined by physical count on December 31, 2014. The company uses the periodic method of inventory. Instructions: (a) Prepare any entries you consider necessary to correct Franciss accounts at December 31. Dec 31, 14 Account Title Amount Account Title Amount Account Title Amount Account Title Amount Dec 31, 14 Account Title Amount Account Title Amount Account Title Amount "(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:" Per Balance Sheet After Adjustment Current assets Debit Credit Debit Credit Cash $39,000 Amount Receivables 42,000 Amount Inventories 67,000 Amount Totals: $148,000 Formula Current Liabilities Accounts Payable $45,000 Amount Other Current Liabilities 14,200 Amount Totals: $59,200 Formula Working capital Formula Formula Current ratio: Formula to 1 Formula to 1