McClinton and Jefferson, an accounting firm, advises Lakeside Seafood that its financial statement must be changed to conform to GAAP. At December 31, 2021, Lakeside’s accounts include the following: 

The accounting firm advised Lakeside of the following:

■ Lakeside has been using the direct write-off method to account for uncollectible receivables. During 2021, the company wrote off bad receivables of $8,500. The aging of Lakeside’s receivables at year-end indicated uncollectibles of $23,500.

■ Lakeside reported net income of $93,000 for 2021.

Requirements

1. Restate Lakeside’s current accounts to conform to GAAP.

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. 

Transcribed Image Text:

I Cash...... Accounts receivable. Inventory... Prepaid expenses. Total current assets. Accounts payable....... Other current liabilities. Total current liabilities.. $77,000 39,000 59,000 9,000 $184,000 $62,000 42,000 $104,000