Reference no: EM132871138
Question - The summary financial statements of Pedro Ltd on December 31, 2018, are as follows:
Cash $5,000
A/R 39,000
Inventory 79,000
PPE, net 125,000
Total $248,000
A/P $75,000
LT-debt 62,000
C/S 60,000
R/E 51,000
Total $248,000
The following errors were made by an inexperienced accountant on December 31, 2018:
The inventory was understated by $17,000.
Accrued December 2018 salaries of $1,800 were not recognized.
Unearned revenue of $2,300 was recorded in the 2018 revenue.
In addition, it was determined that $20,000 of A/P were long-term, and that a $500 dividend was reported as dividend expense and deducted in calculating NI.
The NI reported on the books for 2018 was $53,000.
Required -
a. Calculate WK, current ratio, and debt-to-equity ratio [TL/TE] for Pedro Ltd., based on the original B/S information provided above.
b. Calculate the corrected NI for 2018.
c. Calculate the corrected R/E for December 31, 2018.
d. Show a corrected B/S at December 31, 2018.
e. Using the corrected data, recalculate the ratios in part (a). Explain the resulting differences.