Dumaine Equipment Co closes its books regularly on

December 31
Dumaine Equipment Co. closes its books regularly on December 31, but at the end of 2008 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 following information is given.1. January cash receipts recorded in
the December cash book totaled $39,640, of which $22,000 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 $26,450 on which discounts of $250 were taken.3. The ledger has not been closed
for 2008.4. The amount shown as inventory was determined by physical count on December 31,
2008. The company uses the periodic method of inventory.Instructions(a) Prepare any entries
you consider necessary to correct Dumaine’s accounts at December 31.(b) To what extent was
Dumaine 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 followingamounts:
View Solution:
Dumaine Equipment Co closes its books regularly on December 31
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regularly-on-december-31/

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