Ianthe Limited, a manufacturer of small tools, provided the following information from its accounting records for the year ended December 31, 2017:
Inventory at December 31, 2017 (based on physical count of goods in Ianthe's plant, at cost, on December 31, 2017) .......................................... $1,720,000
Accounts payable at December 31, 2017 .................... 1,300,000
Total current assets ............................................. 2,680,000
Total current liabilities .......................................... 1,550,000
Net sales (sales less sales returns) ............................. 8,550,000
Additional information:
1. Included in the physical count were tools billed to a customer f.o.b. shipping point on December 31, 2017. These tools had a cost of $37,000 and were billed at $57,000. The shipment was on Ianthe's loading dock waiting to be picked up by the common carrier.
2. Goods were in transit from a vendor to Ianthe on December 31, 2017. The invoice was for $51,000, and the goods were shipped f.o.b. shipping point on December 29, 2017. Ianthe will sell these items in 2018 for $87,500. These were excluded from the inventory count.
3. Work-in-process inventory costing $38,000 was sent to an outside processor for plating on December 30, 2017. This was excluded from the inventory count.
4. Tools that were returned by customers and awaiting inspection in the returned goods area on December 31, 2017, were not included in the physical count. On January 8, 2018, these tools, costing $38,000, were inspected and returned to inventory. Credit memos totalling $48,000 were issued to the customers on the same date.
5. Tools shipped to a customer f.o.b. destination on December 26, 2017, were in transit at December 31, 2017, and had a cost of $21,000. When it was notified that the customer received the goods on January 2, 2018, Ianthe issued a sales invoice for $42,000. These were excluded from the inventory count.
6. Goods with an invoice cost of $27,000 that were received from a vendor at 5:00 p.m. on December 31, 2017, were recorded on a receiving report dated January 2, 2018. The goods were not included in the physical count, but the invoice was included in accounts payable at December 31, 2017.
7. Goods that were received from a vendor on December 26, 2017, were included in the physical count. However, the vendor invoice of $56,000 for these goods was not included in accounts payable at December 31, 2017, because the accounts payable copy of the receiving report was lost.
8. On January 3, 2018, a monthly freight bill in the amount of $7,000 was received. The bill specifically related to merchandise purchased in December 2017, and half of this merchandise was still in the inventory at December 31, 2017. The freight charges were not included in either the inventory account or accounts payable at December 31, 2017.
Instructions
(a) Using the format shown below, prepare a schedule of adjustments to the initial amounts in Ianthe's accounting records as at December 31, 2017. Show separately the effect, if any, of each of the eight transactions on the December 31, 2017 amounts. If the transaction has no effect on the initial amount that is shown, write "NONE."

(b) After you arrive at the adjusted balance for part (a) above, determine if the following ratios have improved or if they have deteriorated:
1. Working capital
2. Current ratio
3. Gross profit
4. Profit margin

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Accounts Payable Net Sales Inventory 1,720,000 Initial amounts $1.300,000$8,550,000 Adjustments-increase (decrease) Total adjustments Adjusted amounts