Barton Inc completed its first year of operations on

December #887
Barton Inc. completed its first year of operations on December 31, 2014. 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 2014 has not been recorded. c.
Depreciation on rental cars, amounting to $ 23,000 for 2014, was not recorded. d. Interest on a
$ 20,000, one- year, 10 percent note payable dated October 1, 2014, was not recorded. The full
amount of interest is payable on the maturity date of the note.e. The deferred rental revenue
account has a balance of $ 4,000 as at December 31, 2014, which represents rental revenue for
the month of January 2015. f. Maintenance expense includes $ 1,000, which is the cost of
maintenance supplies still on hand at December 31, 2014. These supplies will be used in 2015.
g. The income tax expense is $ 7,000. Payment of income tax will be made in 2015. Required:1.
For each item, (a) through (g), what adjusting entry, if any, do you recommend that Barton
should record at December 31, 2014? If none is required, explain why. 2. Prepare a correct
statement of earnings for 2014 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 net profit
margin ratio is 18 percent, what might you infer about Barton?View Solution:
Barton Inc completed its first year of operations on December

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