Reference no: EM13614327

The company closes its books regularly on Dec 31, but ast theend of 2007 it held its cash book open so that a more favoravlebalance sheet could be prepared for credit purposes. Cashreceips and disbursements for the first 10 days of January wererecorded as Dec transactions. The following info isgiven.

1) Jan cash receipts recorded in the Dec cash book totaled$39,640, of which $22,000 represents cash sales, and $17,640represents collections on account for which cash discounts of $360were given.

2) Jan cash disbursements recorded in the Dec check registerliquidated accts payable of $26,450, on which discunts of $250 weretaken.

3) The ledger has not been closed for 2007.

4) The amount shown as inventory was determined by physicalcount on Dec 31,2007; the compnay uses the periodic method of inventory.

Instructions:

a) Prepare an entries you consider necessary to correct Dumainaccounts at Dec 31.

b) To what extent was Dumaine Equip co able to show a morefavorable balance sheet at Dec 31 by holding its cash bookopen? (compute working capital and the current ratio) Assume that the balance sheet that was prepared by teh companyshowed the following amounts: cash                                 39,000

receivables                        42,000

inventories                       67,000

accountspayable               45,000

other currentliabilities         14,200