Exercise 8-25

At December 31, 2019, Ruth Lewis Corporation reported current assets of $404,180and current liabilities of $212,800. The following items may have been recorded incorrectly.

1.Goods purchased costing $20,890were shipped f.o.b. shipping point by a supplier on December 28. Lewis received and recorded the invoice on December 29, 2019, but the goods were not included in Lewis's physical count of inventory because they were not received until January 4, 2020.2.Goods purchased costing $16,200were shipped f.o.b. destination by a supplier on December 26. Lewis received and recorded the invoice on December 31, but the goods were not included in Lewis's 2019 physical count of inventory because they were not received until January 2, 2020.3.Goods held on consignment from Claudia Kishi Company were included in Lewis's December 31, 2019, physical count of inventory at $14,160.4.Freight-in of $2,900was debited to advertising expense on December 28, 2019.

Compute the current ratio based on Lewis's balance sheet.(Round ratio to 2 decimal places, e.g. 2.31:1.)

The current ratioenter the current ratio rounded to 2 decimal places

:1

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Recompute the current ratio after corrections are made.(Round ratio to 2 decimal places, e.g. 2.31:1.)

The current ratioenter the current ratio rounded to 2 decimal places

:1

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By what amount will income (before taxes) be adjusted up or down as a result of the corrections? Assume thatgoods are sold in item #4.

Adjust Income$enter a dollar amount of the adjustment