Barton Inc. completed its first year. of operations on December 31, 2011. Because this is the end of the fiscal year, the company bookkeeper prepared the following tentative income statement:

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 2011 has not been recorded.

c. Depreciation on rental cars, amounting to \(\$ 23,000\) for 2011 , was not recorded.

d. Interest on a \(\$ 20,000\), one-year, 10 percent note payable dated October 1,2011 , 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 31,2011 , which represents rental revenue for the month of January 2012.

f. Maintenance expense includes \(\$ 1,000\), which is the cost of maintenance supplies still on hand at December 31, 2011. These supplies will be used in 2012.
g. The income tax expense is \(\$ 7,000\). Payment of income tax will be made in 2012.
Required:
1. For each item \((a)\) through \((g)\) what adjusting entry, if any, do you recommend that Barton should record at December 31, 2011? If none is required, explain why.
2. Prepare a correct income statement for 2011 in good form, including earnings per share, assuming that 7,000 shares are outstanding. Show computations.
3. Compute net profit margin based on the corrected information. What does this ratio suggest? If the industry average for net profit margin is 18 percent, what might you infer about Barton?

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Income Statement, 2011 Rental revenue Expenses: Salaries and wages expense Maintenance expense Rent expense (on location) Utilities expense Gas and oil expense Miscellaneous expenses (items not listed elsewhere) Total expenses Profil $114,000 $28,500 12,000 9.000 4,000 3,000 1,000 57,500 S 56,500