CHAPTER $4$ Adjustments, Financial Statements, and the Closing Process

$4.$ 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 $0\mathrm{.}49,$ what does this suggest to you about Ramirez Company?

$5.$ Record the closing entry at December $31$ of the current year.

Recording Adjusting and Closing Entries and Preparing a Balance Sheet and Income Statement Including Earnings per Share $($AP$4-7)$

P$4-7$

LO$4-1,4-2,4-4$

Tunstall, Inc., a small service company, keeps its records without the help of an accountant. After much effort, an outside accountant prepared the following unadjusted trial balance as of the end of the annual accounting period on December $31$:

Data not yet recorded at December $31$ included

a$.$ The supplies count on December $31$ reflected $$300$ in remaining supplies on hand to be used in the next year.

b$.$ Insurance expired during the current year, $$800.$

c$.$ Depreciation expense for the current year, $$3,700.$

d$.$ Wages earned by employees not yet paid on December $31,$$$640.$

e$.$ Three months of interest expense $($for the note payable borrowed on October $1$ of the current year$)$ was incurred in the current year.

f$.$ Income tax expense, $$5,540.$

Required:

Record the adjusting entries.

Prepare an income statement $($with Operating Income and Other Items sections$)$ and a classified balance sheet that include the effects of the preceding six transactions.

Record the closing entry.