Willenborg Company is completing the information processing cycle at its fiscal year-end.

December 31, 2012. Following are the correct account balances at December 31, 2012, both before and after the adjusting entries for 2012.

Required:
1. Compare the amounts in the columns before and after the adjusting entries to reconstruct the adjusting entries made in 2012. Provide an explanation for each adjustment.
2. Compute the amount of profit, assuming that it is based on the amounts

(a) before adjusting entries and

(b) after adjusting entries. Which profit amount is correct? Explain.
3. Compute the earnings per share, assuming that 4,000 shares are outstanding.
4. Compute the net profit margin. What does this suggest to you about the company?
5. Compute the return on equity, assuming that share capital did not change during the year. What does the computed ratio suggest to you about the company?
6. Prepare the closing entries at December 31, 2012.

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Trial Balance, December 31, 2012 Before After Adjusting Entries Adjustments Adjusting Entries Items Debit Credit Debit Credit Debit Credit a. Cash $ 9,000 $9,000 b. Service revenue receivable 400 c. Prepaid insurance 600 400 d. Equipment e. Accumulated depreciation, equipment f. Accrued advertising payable g. Share capital h. Retained earnings, January 1, 2012 120,200 120,200 $31.500 $40,000 4,700 80.000 80,000 14,000 14,000 i. Service revenue 46,000 46,400 j. Salary expense Insurance expense m. Advertising expense 41,700 41,700 k. Depreciation expense 8,500 200 $171,500 $171,500 4,700 $185,100 $185,100