Reporting a Correct Income Statement with Earnings per Share to Include the Effects of Adjusting Entries and Evaluating the Net Profit Margin as an Auditor

Tyson, Inc., a party rental business, completed its first year of operations on December 31, 2011. Because this is the end of the annual accounting period, the company bookkeeper prepared the following tentative income statement:

You are an independent CPA hired by the company to audit the company's accounting systems and review the financial statements. In your audit, you developed additional data as follows:
a. Wages for the last three days of December amounting to $730 were not recorded or paid.
b. Tyson estimated telephone usage at $440 for December 2011, but nothing has been recorded or paid.
c. Depreciation on rental autos, amounting to $24,000 for 2011, was not recorded.
d. Interest on a $15,000, one-year, 8 percent note payable dated October 1, 2011, was not recorded. The 8 percent interest is payable on the maturity date of the note.
e. Maintenance expense excludes $1,100 representing the cost of maintenance supplies used during 2011.
f. The Unearned Rental Revenue account includes $4,100 of revenue to be earned in January 2012.
g. The income tax expense is $5,800. Payment of income tax will be made in 2012.
Required:
1. What adjusting entry for each item ( a ) through ( g ) should Tyson record at December 31, 2011? If none is required, explain why.
2. Prepare a corrected income statement for 2011 in good form, including earnings per share assuming that 7,000 shares of stock are outstanding all year. Show computations.
3. Compute the net profit margin based on the corrected information. What does this ratio suggest? If the average net profit margin for the industry is 18 percent, what might you infer aboutTyson?

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Income Statement, 2011 $109,000 Rental revenue Expenses: Salaries and wages expense Maintenance expense Rent expense Utilities expense Gas and oil expense Miscellaneous expenses (items not listed elsewhere) 26,500 12,000 8,800 4,300 3,000 1,000 Total expenses 55,600 $ 53,400 Income