Taos Company is completing the information processing cycle at the end of its fiscal year on December
Question:
Taos Company is completing the information processing cycle at the end of its fiscal year on December 31. Following are the correct balances at December 31 of the current year for the accounts both before and after the adjusting entries for the current year.
Required:
1. Compare the amounts in the columns before and after the adjusting entries to reconstruct the adjusting entries made in the current year. Provide an explanation of each.
2. Compute the amount of net income, assuming that it is based on the amount (a) before adjusting entries and (b) after adjusting entries. Which net income amount is correct? Explain why.
3. Compute earnings per share (rounded to two decimal places), assuming that 5,000 shares of stock are outstanding.
4. Assuming total assets were $136,000 at the beginning of the year, compute the total asset turnover ratio (rounded to two decimal places). What does this tell you about Taos Company?
5. Record the closing entry at December 31 of the current year.
Step by Step Answer:
Financial Accounting
ISBN: 9781264229734
11th Edition
Authors: Robert Libby, Patricia Libby, Frank Hodge