Savory Ltd is completing the information processing cycle at its
Savory Ltd. is completing the information- processing cycle at its fiscal year- end, December 31, 2015. Following are the correct account balances at December 31, 2015, both before and after the adjusting entries for 2015:
Required:
1. Compare the amounts in the columns before and after the adjusting entries to reconstruct the adjusting entries made in 2015. Explain each adjustment.
2. Compute the amount of net earnings, assuming that it is based on the amounts (a), before adjusting entries, and (b), after adjusting entries. Which net earnings amount is correct? Explain.
3. Compute the earnings per share, assuming that 4,000 shares are outstanding.
4. Compute the net profit margin ratio and the return on equity, assuming that contributed capital did not change during the year. What do the computed ratios suggest to you about the company?
5. Prepare the closing entries at December 31, 2015.
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