Ramirez Company is completing the information processing cycle at its fiscal year-end on December 31. Following are the correct balances at December 31 for the accounts both before and after the adjusting entries.

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 amounts (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 3,000 shares of stock are outstanding all year.

4. Compute the total asset turnover ratio (rounded to two decimal places), assuming total assets at the beginning of the year were $110,000. If the industry average is 0.49, what does this suggest to you about Ramirez Company?
5. Record the closing entry at December 31 of the current year.

Transcribed Image Text:

1 23 4 5 Cash 6 Accounts receivable 7 Prepaid insurance 8 Equipment 9 Accumulated depreciation, equipment OF 10 11 12 13 14 15 16 17 18 RAMIREZ COMPANY Trial Balance Spreadsheet on December 31 of the Current Year UNADJUSTED ADJUSTMENTS Income taxes payable Common stock and additional paid-in capital Retained earnings, January 1 Service revenue Salary expense Depreciation expense Insurance expense Income tax expense Total Debit 13,500 850 162,280 55,470 Credit Ref. Debit 42,100 112,000 19,600 64,400 232,100 238,100 Credit ADJUSTED Debit Credit 13,500 1,820 720 168,280 48,100 1,155 112,000 19,600 66,220 55,470 6,000 130 1,155 247,075 247,075