Liner Company has the following adjusted trial balance at December 31, 2011. No dividends were declared; however, 400 additional shares were issued during the year for \(\$ 2,000\) :

Required:
1. Prepare an income statement in good form for 2011. Include earnings per share.
2. Prepare closing entries and post the effects to the appropriate ledger accounts.
3. Prepare a statement of financial position in good form at December 31, 2011.
4. Compute Liner Company's net profit margin for the year. What does this ratio mean?
5. Compute Liner Company's return on equity for the year. What does this ratio mean?

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Debit Credit Cash Trade receivables Interest receivable Prepayments Notes receivable Equipment Accumulated depreciation Trade payables $ 2,700 3,000 120 600 3,000 12,000 $ 2,000 1,600 Accrued liabilities 3,820 Income taxes payable Deferred rent revenue Share capital (500 shares) Retained earnings Sales revenue 2,900 600 2.400 1,000 45,000 Interest revenue -120 Rent revenue 300 Wages expense 20,600 Depreciation expense 2,000 Utilities expense 1,220 Insurance expense 600 Rent expense 10,000 Income tax experse 3,900 Total $59,740 $59,740