Homework Answers
1. Current ratio = Current assets / Current liability
= $406510 / 196600 = 2.07 : 1
2. Current ratio = (406510 + 21000 - 11950 + 3240)/ (196600 - 15,430) = 2.31:1
3. Event Effect of Error Adjust Income, Increase Decrease)
1. Understatement of ending inventory (Decreases net income) $21,000
2. Overstatement of purchases (Decreases net income) 15,430
3. Overstatement of ending inventory (Increases net income) (11,950)
4. Overstatement of advertising expense; understatement of COGS 0
Total $24,480
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