The CFO of Last Things Computing, Inc. (LTC) prepared the following balance sheet and statement of net income for the year ended December 31, 2016.
Last Things Computing, Inc.
Balance Sheet
At December 31, 2016

Last Things Computing, Inc.
Statement of Net Income
For the Year Ended December 31, 2016

LTC had 15,000 common shares outstanding for the entire year. It had no preferred stock or dilutive securities. Assume that LTC records income tax expense at 35% of income from continuing operations before income taxes.
The CFO has the following adjustments to make before finalizing the financial statements.
1. LTC will need to record some amount of bad debt expense. The offset will be a reduction in accounts receivable. This adjustment is a matter of judgment and reasonable estimates range between $ 1,000 and $ 3,000.
2. LTC will need to write down its inventory (i. e., reduce the reported value of inventory). The offset will be to cost of goods sold. This adjustment is a matter of judgment and reasonable estimates range between $ 2,500 and $ 3,750.
3. LTC may need to impair its PPE (that is, reduce the reported value of PPE). The offset will be an impairment loss reported on the statement of net income. This adjustment is a matter of judgment and reason-able estimates range between $ 0 and $ 5,000.
4. LTC may need to impair its noncurrent investments by reducing the reported value of noncurrent investments. The offset will be an impairment loss reported on the statement of net income. This adjustment is a matter of judgment and reasonable estimates range between $ 250 and $ 750.
5. LTC may need to record a litigation contingency by recording a liability for an unresolved lawsuit. The offset is to litigation expense. The lawsuit is expected to be settled in 2017. Reasonable estimates of the amount that LTC may be liable for range from $ 2,000 to $ 10,000.
6. LTC may need to reduce the reported amount of its deferred tax asset. The amount by which the asset needs to be reduced is highly judgmental and ranges from $ 0 to $ 5,000. The offset to this adjustment is income tax expense. Assume the deferred tax asset is noncurrent.
7. LTC currently has unearned revenue on its balance sheet of $ 5,400. However, up to $ 5,000 of this amount could possibly be recognized as revenue in 2016. The amount is a matter of judgment.
Required
1. If LTC makes the most conservative choices for all these adjustments that will result in the lowest net income number, what is the impact on assets and liabilities, in terms of absolute dollar impact and percentage change? What is the impact on net income and earnings per share?
2. If LTC makes the least conservative choices for all these adjustments that will result in the highest net income number, what is the impact on assets and liabilities, in terms of absolute dollar impact and percentage change? What is the impact on net income and earnings per share?
3. What is the impact on the current ratio of these choices if management makes the most conservative choices? What is the impact on this ratio if management makes the least conservative choices?
4. Do you think that the management of LTC will care very much about the choices related to these adjustments?

Trading securities at fair value Accounts receivable net Total Current Assets Machinery and equipmert Less: Accumulated Depreciation Total Property, plant, and equipment-net Intangible assets: Franchise-net Total long-term assets Current portion of long-term debt Total Current Liabilities Total long-term liabilities Stockholders' Equity Common stock-at par Additional paid-n capital Retained earnings Accumulated other comprehensive income s 15,000 34,500 77900 9,000 S136,400 $384,450 Total stockholders' equity Total liabilities and stockholdars equity Revenues and Gains Sales Interest income Dividend income Income from Associates Gain on disposal of plant assets Total revenues and gains $578.540 25,000 2,500 9,000 5,800 $620,840 Expenses and Losses Cost of goods sold Selling expenses and salaries Office supplies expense Advertising expense Office salaries expense Depreciation expense Interest expense Loss on asset impairment Total expenses and losses $172,000 48,000 40,000 21,000 11,000 5,500 3,500 2,000 $303,000 $ 317840 111,244) $206,596 Income before taxes income tax expense Income from Continuing Operations Discontinued Operations Income from operations of discontinued segment, net of tax of $4,000 Loss from disposal of discontinued segment, net of tax of $3,000 10.000 9.800 Net Income $206,796 Eamings per Share Income from Continuing Operations Income from Discontinued Operations $13.77 0.02 S13.79 Eamings per Share