Wagonblatt Company is completing the information processing cycle at its fiscal year-end, December 31, 2010. Following are the correct balances at December 31, 2010, for the accounts both before and after the adjusting entries for 2010.

Required:
1. Compare the amounts in the columns before and after the adjusting entries to reconstruct the adjusting entries made in 2010. Provide an explanation of each.
2. Compute the amount of income assuming that it is based on the amounts (a) before adjusting entries and (b) after adjusting entries. Which income amount is correct? Explain why.
3. Compute earnings per share, assuming that 3,000 shares of stock are outstanding all year.
4. Compute the net profit margin. What does this suggest to you about the company?
5. Record the closing entry at December 31, 2010.
6. Prepare a post-closing trial balance at December 31,2010.

Transcribed Image Text:

Trial Balance, December 31, 2010 Before After Adjusting Entries Adjustments DebitCredit Adjusting Entries Dbt Credit 12.600 Items Debit Credit a. Cash b Accounts receivable c. Prepaid insurance d. Equipment e. Accumulated depreciation, S 12,600 560 168,280 168,280 S 44,100 equipment f. Income taxes payable g. Contributed capital h. Retained earnings, S 56,000 6.580 112.000 12.000 19,600 64.400 19,600 64,960 January 1, 2010 L Service revenue j. Salary expense k Depreciation expense Insurance expense . Income tax expense 58.380 58,380 11,900 280 6.580 $240,100 S240,100 $259,140 $259.140