Reference no: EM132470044
Problem - At December 31, 2016, Shamrock Corporation reported current assets of $384,510 and current liabilities of $212,400. The following items may have been recorded incorrectly.
1. Goods purchased costing $21,860 were shipped f.o.b. shipping point by a supplier on December 28. Shamrock received and recorded the invoice on December 29, 2016, but the goods were not included in Shamrock's physical count of inventory because they were not received until January 4, 2017.
2. Goods purchased costing $14,970 were shipped f.o.b. destination by a supplier on December 26. Shamrock received and recorded the invoice on December 31, but the goods were not included in Shamrock's 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 Shamrock's December 31, 2016, physical count of inventory at $13,130.
4. Freight-in of $3,200 was debited to advertising expense on December 28, 2016.
Required -
1. Compute the current ratio based on Shamrock's balance sheet.
2. Re-compute the current ratio after corrections are made.
3. 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.
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