Question

Current Attempt in Progress The current assets and current liabilities sections of the balance sheet of Bonita Company appear as follows. cash $48,600 Account payable $65,590 account receivable $95,200 notes payable 73,440 less : allowance for 8,060 87,140 $139,030 doubtfull accounts inventory 167,370 prepaid expenses 8,130 $311.240 The following errors in the corporation's accounting have been discovered: 1. January 2026 cash disbursements entered as of December 2025 included payments of accounts payable in the amount of $43,900, on which a cash discount of 2% was taken. 2. The inventory included $29,940 of merchandise that had been received at December 31 but for which no purchase invoices had been received or entered. Of this amount, $10,460 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 2026 in the amount of $30,260 were entered in the sales journal as of December 31 , 2025. Of these, $20,000 were sales on account and the remainder were cash sales. 4. Cash, not including cash sales, collected in January 2026 and entered as of December 31,2025 , totaled $35,520. Of this amount, $23,520 was received on account after cash discounts of 2% had been deducted; the remainder represented the proceeds of a bank loan.

Answer 1

The T-account balance sheet for the bank would include assets such as reserves, government bonds, and loans, as well as liabilities such as deposits. The bank's net worth can be calculated by subtracting the liabilities from the assets.

Step-by-step explanation:

The balance sheet of a bank includes assets and liabilities.

Assets represent what the bank owns, while liabilities represent what the bank owes.

In this case, the bank has deposits totaling $400, reserves of $50, government bonds worth $70, and loans of $500. The bank's T-account balance sheet would look like this:

Assets:

- Reserves: $50

- Government Bonds: $70

- Loans: $500

Liabilities:

- Deposits: $400

The bank's net worth can be calculated by subtracting the liabilities from the assets:

Net Worth = Total Assets - Total Liabilities

Net Worth = ($50 + $70 + $500) - $400

Net Worth = $620 - $400

Net Worth = $220

Answer 2

To correct the errors in Bonita Company's accounting, we need to make the necessary adjustments. Let's address each error step by step:

Error 1:

- January 2026 cash disbursements entered as of December 2025 included payments of accounts payable in the amount of $43,900, on which a cash discount of 2% was taken.

To correct this error, we need to reverse the incorrect entry and make the appropriate adjustments:

- Debit Accounts Payable: $43,900 (to reverse the payment)

- Credit Cash: $43,900 (to reverse the cash outflow)

- Credit Cash Discounts Forfeited: $878 (2% of $43,900)

Error 2:

- The inventory included $29,940 of merchandise that had been received at December 31 but for which no purchase invoices had been received or entered. Of this amount, $10,460 had been received on consignment; the remainder was purchased f.o.b. destination, terms 2/10, n/30.

To correct this error, we need to adjust the inventory:

- Debit Inventory: $29,940 (to include the missing inventory)

- Credit Accounts Payable: $19,480 (to account for the purchased merchandise, $29,940 - $10,460)

Error 3:

- Sales for the first four days in January 2026 in the amount of $30,260 were entered in the sales journal as of December 31, 2025. Of these, $20,000 were sales on account, and the remainder was cash sales.

To correct this error, we need to reverse the incorrect entry and make the appropriate adjustments:

- Debit Accounts Receivable: $20,000 (to reverse the incorrect accounts receivable)

- Debit Cash: $10,260 (to reverse the incorrect cash sales)

- Credit Sales Revenue: $30,260 (to remove the sales recorded in error)

Error 4:

- Cash, not including cash sales, collected in January 2026 and entered as of December 31, 2025, totaled $35,520. Of this amount, $23,520 was received on account after cash discounts of 2% had been deducted; the remainder represented the proceeds of a bank loan.

To correct this error, we need to reverse the incorrect entry and make the appropriate adjustments:

- Debit Cash: $35,520 (to reverse the incorrect cash entry)

- Credit Accounts Receivable: $23,520 (to account for the accounts received)

- Credit Cash Discounts Allowed: $480 (2% of $23,520)

- Credit Bank Loan Payable: $11,520 (to account for the bank loan proceeds)

After making these adjustments, the balance sheet should accurately reflect the company's financial position.