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.

1 2 3 4 5 Cash 6 Accounts receivable 7 Prepaid rent 8 Property, plant, and equipment Accumulated depreciation Income taxes payable Unearned revenue 9 10 11 12 Common stock and additional paid-in capital Retained earnings, January 1 13 34 14 Service revenue Salary expense Depreciation expense Rent expense Income tax expense 15 16 17 18 RAMIREZ COMPANY Trial Balance Spreadsheet on December 31 of the Current Year UNADJUSTED ADJUSTMENTS 89 19 Total Debit 18,000 1,200 208,000 56,000 Credit Ref. Debit 52,500 16,000 110,000 21,700 83,000 283,200 283,200 Credit ADJUSTED Debit Credit 18,000 1,500 800 208,000 56,000 17,500 400 4,650 306,850 70,000 4,650 8,000 110,000 21,700 92,500 306,850