Exercise 8-25 (Part Level Submission)

At December 31, 2016, Flounder Corporation reported current assets of $348,310 and current liabilities of $192,400. The following items may have been recorded incorrectly.

1.		Goods purchased costing $24,200 were shipped f.o.b. shipping point by a supplier on December 28. Flounder received and recorded the invoice on December 29, 2016, but the goods were not included in Flounders physical count of inventory because they were not received until January 4, 2017.
2.		Goods purchased costing $15,090 were shipped f.o.b. destination by a supplier on December 26. Flounder received and recorded the invoice on December 31, but the goods were not included in Flounders 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 Flounders December 31, 2016, physical count of inventory at $14,140.
4.		Freight-in of $2,760 was debited to advertising expense on December 28, 2016.

(a)

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

The current ratio

:1

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(b)

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

The current ratio

:1

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(c)

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

$

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