Assume Smith & Jones, the accounting firm, advises Ocean Mist Seafood that its financial statements must be changed to conform to GAAP. At December 31, 2010, Ocean Mists accounts include the following:
Cash.................................................................................. $ 53,000
Short-term investment in trading securities, at cost......... 24,000
Accounts receivable......................................................... 36,000
Inventory......................................................................... 63,000
Prepaid expenses ............................................................ 10,000
Total current assets ......................................................... $186,000
Accounts payable............................................................ $ 67,000
Other current liabilities.................................................... 39,000
Total current liabilities..................................................... $106,000
The accounting firm advised Ocean Mist that
Cash includes $17,000 that is deposited in a compensating balance account that is tied up until 2012.
The market value of the trading securities is $10,000. Ocean Mist purchased the investments a couple of weeks ago.
Ocean Mist has been using the direct write-off method to account for uncollectible receivables. During 2010, Ocean Mist wrote off bad receivables of $7,500. Smith & Jones determines that uncollectible-account expense should be 3% of sales revenue, which totaled $600,000 in 2010. The aging of Ocean Mists receivables at year-end indicated uncollectibles of $10,500.
Ocean Mist reported net income of $92,000 in 2010.

Requirements
1. Restate Ocean Mists current accounts to conform to GAAP. (Challenge)
2. Compute Ocean Mists current ratio and acid-test ratio both before and after your corrections.
3. Determine Ocean Mists correct net income for 2010. (Challenge)