Wronkovich & Sells, an accounting firm, advises Off the Boat Seafood that its financial statements must be changed to conform to GAAP. At December 31, 2021, Off the Boat’s accounts include the following:

The accounting firm advised Off the Boat of the following:

■ Off the Boat has been using the direct write-off method to account for uncollectible receivables. During 2021, the company wrote off bad receivables of $4,500. The aging of Off the Boat’s receivables at year-end indicated uncollectibles of $28,500.

■ Off the Boat reported net income of $93,000 in 2021.

Requirements

1. Restate Off the Boat’s current accounts to conform to GAAP. (Challenge).

2. Compute the company’s current ratio and quick (acid-test) ratio both before and after your correction.

3. Determine the company’s correct net income for 2021. (Challenge).

Transcribed Image Text:

Cash. Accounts receivable..... Inventory.. Prepaid expenses. Total current assets Accounts payable..... Other current liabilities. Total current liabilities. $83,000 40,000 57,000 18,000 $198,000 $62,000 42,000 $104,000