Problem 7-1 Sarasota Equipment Co. closes its books regularly on December 31, but at the end of 2017 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 $54,400, of which $32,700 represents cash sales, and $21,700 represents collections on account for which cash discounts of $359 were given 2. January cash disbursements recorded in the December check register liquidated accounts payable of $23,967 on which discounts of $240 were taken. 3. The ledger has not been closed for 2017. 4. The amount shown as inventory was determined by physical count on December 31, 2017 The company uses the periodic method of inventory Prepare any entries you consider necessary to correct Sarasota's accounts at December 31. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. No. Date Account Titles and Explanation . Dec. 31 Debit Credit Prepare any entries you consider necessary to correct Sarasota's accounts at December 31. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) No. Date Account Titles and Explanation 1. Dec. 31 Debit Credit 2. Dec. 31 To what extent was Sarasota 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: (Round ratios to 2 decimal place, e.g. 4.56) Dr. $41,110 40,960 72,370 Cr. Cash Accounts receivable Inventory Accounts payable Other current liabilities $48,230 15,225 Per Balance Sheet After Adjustment Working capital Current ratio to 1 to 1