Wronkovich & Sells, an accounting firm, advises Off the Boat Seafood that its financial statements must be changed to conform to GAAP. At December 31, 2018, Off the Boat’s accounts include the following:

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

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 2018, 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 2018.

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 2018. (Challenge)