Solution-Restate pappadeauxs current accounts to conform to

Restate pappadeauxs current accounts to conform to gaap

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Reference no: EM13554662

Assume Deloitte & Touche, the accounting firm, advises Pappadeaux Seafood that Pappadeaux's financial statements must be changed to conform to GAAP. At December 31, 20X7, Pappadeaux's accounts include the following:

Cash	$ 51,000
Short-term trading investments, at cost	19,000
Accounts receivable	37,000
Inventory	61,000
Prepaid expenses	14,000
Total current assets	$182,000
Accounts payable	$ 62,000
Other current liabilities	41,000
Total current liabilities	$103,000

Deloitte & Touche advised Pappadeaux that • Cash includes $20,000 that is deposited in a compensating balance account that is tied up until 20X9.

The market value of the short-term trading investments is $17,000. Pappadeaux purchased the investments a couple of weeks ago.
Pappadeaux has been using the direct write-off method to account for uncollectible receivables. During 20X7, Pappadeaux wrote off bad receivables of $7,000. Deloitte & Touche determines that uncollectible-account expense should be 2.5% of sales revenue, which totaled $600,000 in 20X7. The aging of Pappadeaux's receivables at year end indicated uncollectibles of $5,000.
Pappadeaux reported net income of $92,000 in 20X7.

Required

1. Restate Pappadeaux's current accounts to conform to GAAP. (Challenge)

2. Compute Pappadeaux's current ratio and acid-test ratio both before and after your corrections.

3. Determine Pappadeaux's correct net income for 20X7. (Challenge)

Reference no: EM13554662

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Restate pappadeauxs current accounts to conform to gaap

Reference no: EM13554662

Reference no: EM13554662

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