The current assets and current liabilities sections of the balance sheet of Agincourt Company appear as follows.

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

1. January 2013 cash disbursements entered as of December 2012 included payments of accounts payable in the amount of $35,000, 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, $10,000 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 2013 in the amount of $30,000 were entered in the sales book as of December 31, 2012. Of these, $21,500 were sales on account and the remainder were cash sales.

4. Cash, not including cash sales, collected in January 2013 and entered as of December 31, 2012, 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 Agincourt Company's retained earningsbalance.

AGINCOURT COMPANY BALANCE SHEET (PARTIAL) DECEMBER 31, 2012 Cash $ 40,000 Accounts payable Notes payable $ 61,000 Accounts receivable $89,000 67,000 Less: Allowance for $128,000 doubtful accounts 7,000 82,000 Inventory Prepaid expenses 171,000 9,000 $302,000