Ramirez Company is completing the information processing cycle at its fiscal yea

ID: 2333891 • Letter: R

Question

Ramirez Company is completing the information processing cycle at its fiscal year-end, December 31, 2015. Following are the correct balances at December 31, 2015, for the accounts both before and after the adjusting entries for 2015.

Ramirez Company is completing the Information processing cycle at its fiscal year-end, December 31, 2015. Following are the correct balances at December 31, 2015, for the accounts both before and after the adjusting entries for 2015 Trial Balance, December 31. 2015 Before After Adjusting Entries Deblt Adjusting Entries Debit ltems Credit Credit a. Cash b. Accounts recelvable C. Prepald Insurance d. Equipment e. Accumulated depreciation, equipment f. Income taxes payable g. Contributed capital h. Retained earnings, January 1, 2015 l. Service revenue J. Salary expense k. Depreciation expense I. Insurance expense m. Income tax expense $ 13,200 $13,200 520 240 168,580 360 168,580 $ 41.800 08,000 12,920 74,000 $ 47400 1,360 08,000 12,920 74,520 54,580 54,580 5,600 120 1.360 $ 236,720 236,720 $244,200 244,200 4. Compute the total asset turnover ratio, assuming total assets at December 31, 2014, were $109,600. If the industry average is 0.46. (Round your answer to 3 decimal places.) Total asset turnover ratio

Explanation / Answer

Closing Entry

Transaction

General Journal

Debit

Credit

Service Revenue

$ 74,520.00

Retained earnings

$ 12,860.00*

salary Expense

$ 54,580.00

Depreciation Expense

$ 5,600.00

Insurance Expense

$ 120.00

Income taxes Expense

$ 1,360.00

*Total revenue minus Total expenses

Calculation of Asset turnover ratio

To calculated Asset turnover ratio first total assets needs to be calculated

Total Assets

Cash

$ 13,200.00

Accounts Receivables

$ 520.00

Prepaid Insurance

$ 240.00

Equipment

$ 168,580.00

Accumulated depreciation-Equipment

$ 47,400.00

$ 121,180.00

Total Assets at December 15

$ 135,140.00

Average Assets= ($ 135140+109600)/2

Average Assets=$ 122,370

Asset Turnover ratio = Service Revenue/Average Total Assets

Asset Turnover ratio =($ 74520/122370)

Asset Turnover ratio =0.60 times

Note:: Asset turnover of the company is more than Industry average.