Chapter 5, Problem 5.59AP

(Learning Objectives 5, 7: Apply GAAP for uncollectible receivables; evaluate liquidity through ratios) Wronkovich & Sells, an accounting firm, advises Off the Boat Seafood that its financial statements must be changed to conform to GAAP. At December 31, 2018, Off the Boat’s accounts include the following:

Cash....................................................................	$83,000
Accounts receivable.......................................................	40,000
Inventory..........................................................................	57,000
Prepaid expenses..................................................................	18,000
Total current assets........................................................	$198,000
Accounts payable.................................................................	$62,000
Other current liabilities.............................................	42,000
Total current liabilities.....................................................	$104,000

The accounting firm advised Off the Boat of the following:

• Off the Boat has been using the direct write-off method to account for uncollectible receivables. During 2018, the company wrote off bad receivables of $4,500. The aging of Off the Boat’s receivables at year-end indicated uncollectibles of $28.500
• Off the Boat reported net income of $93,000 in 2018.