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E4-14 Recording the Effects of Adjusting Entries, Reporting a Correct Statement of Earnings with Earnings per Share, and Evaluating Barton Inc. completed its first year of operations on December 31. Because this is the end of the fiscal year, the company bookkeeper prepared the following tentative statement of earnings: You are an independent accountant hired by the company to audit its accounting systems and review its financial statements. In your audit, you developed additional data as follows: a. Unpaid wages for the last three days of December amounting to $310 were not recorded. b. The unpaid $400 telephone bill for December has not been recorded. c. Depreciation on rental cars, amounting to $23,000 for the current year, was not recorded. d. Interest on a $20,000, one-year, 10 percent note payable dated October 1 of the current year, was not recorded. The full amount of interest is payable on the maturity date of the note. e. The deferred rental revenue account at December 31, includes $4,000 to be earned in January of the next year. f. Maintenance expense includes $1,000, which is the cost of maintenance supplies still on hand at December 31 . These supplies will be used in the next year. g. The income tax expense is $7,000. Payment of income tax will be made next year. Page 222 Required: 1. For each item (a) through (g), identify the expense or revenue account that should be adjusted and the amount of the adjustment at December 31. If none is required, explain why. 2. Prepare a correct statement of earnings for the current year in good form, including earnings per share, assuming that 7,000 shares are outstanding. Show computations. 3. Compute the net profit margin ratio based on the corrected information. What does this ratio suggest? If the industry average for the net profit margin ratio is 18 percent, what might you infer about Barton

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