PLEASE EXPLAIN THE ADJUSTMENTS MADE BY THIS USER AFTER THE RECASTING OF INCOME STATEMENT AND BALANCE SHEET. THANK YOU.

Income Statement	As Recast		Statements as originally presented
For Year Ended December 31, (in $ 000s)	2017	Adjustments	2017	2016	2015
Sales revenues	33,735	2,000	35,735	31,906	30,100
Cost of goods sold	14,388	853	15,241	13,608	12,840
Gross profit	19,347	1,147	20,494	18,298	17,260
Selling, general, and administrative expenses	10,270	(1,000)	9,270	8,427	8,025
Depreciation expenses	545	100	645	640	625
Research and development expense	660	-	660	756	700
Operating Income	7,872	2,047	9,919	8,475	7,910
Interest expense	1,200	-	1,200	1,200	1,200
Net Income	6,672	2,047	8,719	7,275	6,710
Balance Sheet			As Presented
December 31, (in $ 000s)	2017	Adjustments	2017	2016
Assets
Cash	5,728		5,728	2,123
Accounts receivable	5,047	(2,000)	7,047	6,282
Inventory	6,665	853	5,812	4,531
Other current assets	1,649		1,649	134
Current assets	19,089	(1,147)	20,236	13,070
Property, plant, and equipment's	32,167	(900)	33,067	34,737
Total Assets	51,256	(2,047)	53,303	47,807
Liabilities
Accounts payable	4,253		4,253	3,402
Accrued liabilities	889		889	846
Current liabilities	5,142	-	5,142	4,248
Note Payable	20,000		20,000	20,000
Total Liabilities	25,142	-	25,142	24,248
Shareholders' Equity
Common stock	20,000		20,000	20,000
Retained earnings	6,114	(2,047)	8,161	3,559
Total Shareholders' Equity	26,114	(2,047)	28,161	23,559
Total Liabilities and Shareholders' Equity	51,256	(2,047)	53,303	47,807

The company originally presented income statement have booked revenues of $2 million.it shipped product to some of its regular customers at end of 2017. Zodiak had not received customer purchase order for these. In addition, Zodiak's sales force told the customer that they could return the goods in 2018 if they didn't want.

As per GAAP revenue from sales of goods should be recognized when the customer obtains control of goods. Control would generally require followings.

The entity (seller) has a right to payment and the customer has obligation to payment.

The customer has legal title to the goods. The seller has transferred the physical possession of goods

The customer has the significant rewards and risk to ownership. The customer has accepted goods.

as these condition not satisfied, entity should reverse revenue and recognize goods cost as inventory.

In present case it is very clear goods will be returned by customer and company do not have any right to receive consideration. The risk and reward of ownership is with Zodiak

Cost of corporate reorganization of $ 1 Million should be expense because it was a necessary cost of doing business in that year. It does not meet criteria of PP&E.