At December 31 2016 Skysong Corporation reported current ass

At December 31, 2016, Skysong Corporation reported current assets of $358,170 and current liabilities of $190,300. The following items may have been recorded incorrectly.

At December 31, 2016, Skysong Corporation reported current assets of $358,170 and current liabilities of $190,300. The following items may have been recorded incorrectly.

Secure https://edugen.wileyplus.com/edugen/shared/assignment/test/qprint.uni ACTG3110-001 Ch 8 Exercises *Exercise 8-25 At December 31, 2016, Skysong Corporation reported current assets of $358,170 and current liabilities of $190,300. The following items may have been recorded incorrectly 1. Goods purchased costing $19,960 were shipped f.o.b. shipping point by a supplier on December 28. Skysong received and recorded the invoice on December 29, 2016, but the goods were not included in Skysong\'s physical count of inventory because they were not received until January 4, 2017. 2. Goods purchased costing $14,800 were shipped f.o.b. destination by a supplier on December 26. Skysong received and recorded the invoice on December 31, but the goods were not included in Skysong\'s 2016 physical count of inventory because they were not received until January 2, 2017. 3. Goods held on consignment from Claudia Kishi Company were included in Skysong\'s December 31, 2016, physical count of inventory at $12,340 4. Freight-in of $2,740 was debited to advertising expense on December 28, 2016. Compute the current ratio based on Skysong\'s balance sheet. (Round ratio to 2 decimal places, e.g. 2.31:1.) The current ratio Recompute the current ratio after corrections are made. Round ratio to 2 decimal places, e.g. 2.31:1.) The current ratio By what amount will income (before taxes) be adjusted up or down as a result of the corrections? Assume that goods are sold in item #4 Adjust Income Question Attempts: 1 of 3 used 2000-2018 by John Wiley & Sons, Inc. or related comperies. A1 ngres reserved

Solution

Current ratio = Current Assets / Current Liabilities 1 The Current Ratio = 1.88 : 1 ($3,58,170/$1,90,300) Current Assets = $       3,58,170 Current Liabilities = $       1,90,300 2 The Current Ratio = 2.10 : 1 ($3,68,530/$1,75,500) Current Assets = $3,58,170 + $19,960 -$12,340 + $2,740 = $       3,68,530 Current Liabilities = $1,90,300 - $14,800 = $       1,75,500 3 Event Effect of error Adjust Income(Increase/Decrease) Understatement of ending inventory Decreases Net income $           19,960 Overstatement of Purchase Decreases Net income $           14,800 Overstatement of ending inventory Increases Net income $         -12,340 Overstatement of Advertisement expense, Understatement of cost of goods sold $ 0 Amount of Adjustment $           47,100