Assume Cline & Nichols, the accounting firm, advises Derbyshire Seafood that its financial statement must be changed to conform to GAAP. At December 31, 2012, Derbyshire’s accounts include the following:
Cash................................................................ $ 50,000
Short-term trading securities, at cost ............... 20,000
Accounts receivable......................................... 41,000
Inventory......................................................... 57,000
Prepaid expenses ............................................. 16,000
Total current assets ..................................... $184,000
Accounts payable .......................................... $ 60,000
Other current liabilities .................................... 40,000
Total current liabilities ................................. $100,000

The accounting firm advised Derbyshire of the following:
Cash includes $19,000 that is deposited in a compensating balance account that will be tied up until 2014.
The market value of the trading securities is $12,000. Derbyshire purchased the trading securities a couple of weeks ago.
Derbyshire has been using the direct write-off method to account for uncollectible receivables. During 2012, Derbyshire wrote off bad receivables of $6,500. Cline & Nichols determines that uncollectible-account expense should be 3% of service revenue, which totaled $630,000 in 2012. The aging of Derbyshire’s receivables at year-end indicated uncollectibles of $12,400.
Derbyshire reported net income of $94,000 for 2012.

Requirements
1. Restate Derbyshire’s current accounts to conform to GAAP. (Challenge)
2. Compute Derbyshire’s current ratio and quick (acid-test) ratio both before and after your corrections.
3. Determine Derbyshire’s correct net income for 2012. (Challenge)