Question 1 At December 31, 2016, Bonita Corporation reported current assets of $

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Question 1 At December 31, 2016, Bonita Corporation reported current assets of $343,980 and current liabilities of $196,600. The following items may have been recorded incorrectly 1. Goods purchased costing $20,440 were shipped f.o.b. shipping point by a supplier on December 28. Bonita received and recorded the invoice on December 29, 2016, but the goods were not included in Bonita's physical count of inventory because they were not received until January 4, 2017 2. Goods purchased costing $15,950 were shipped f.o.b. destination by a supplier on December 26. Bonita received and recorded the invoice on December 31, but the goods were not included in Bonita'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 Bonita's December 31, 2016, physical count of inventory at $11,890. 4. Freight-in of $3,040 was debited to advertising expense on December 28, 2016. Compute the current ratio based on Bonita's balance sheet. (Round ratio to 2 decimal places, e.g. 2.31:1.) The current ratio

Explanation / Answer

EFFECT OF EACH TRANSACTIONS ON CURRENT ASSETS AND CURRENT LIABILITIES BALANCES TRANSACTION CURRENT ASSETS CURRENT LIABILITIES Good purchased FOB shipping to be included in inventory 20440 Good purchased FOB destinations shall not be recorded as Purchase -15950 Goods held as consignment not to be included in Inventory -11890 Freight in shall be charged to inventory hence increase inventor 3040 Net increase /decrease 11590 -15950 Balances before adjustment 343980 196600 Rectified balances after adjustment 355570 180650 Current ratio: Current Assets / Current Liabilities = 355,570 /180,650 = 1.97

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