Reference no: EM132769409

Question - Pasceri Dog Trainers has a July 31 fiscal year end and uses a perpetual inventory system with the earnings approach. An alphabetical list of its account balances at December 31, 2021, follows. All accounts have normal balances.

A. Pasceri capital $156,500

Interest payable $ 575

A. Pasceri drawings 29,600

Interest revenue 3,000

Accounts payable 7,600

Merchandise inventory 41,250

Accounts receivable 38,900

Note payable 46,000

Accumulated depreciation-equipment 33,400

Notes receivable 75,000

Cash 30,875

Rent expense 62,000

Cost of goods sold 247,500

Salaries expense 45,000

Depreciation expense 8,350

Sales 450,000

Equipment 83,500

Sales discounts 4,500

Freight out 6,055

Sales returns and allowances 11,250

Insurance expense 3,195

Unearned revenue 4,800

Interest expense 2,300

Utilities expense 12,600

Additional information:

1. All adjustments have been recorded and posted except for the inventory adjustment. According to the inventory count, the business has $40,000 of merchandise on hand.

2. Last year Pasceri had a gross profit margin of 40% and a profit margin (on Net Income) of 10%.

Required -

a. Journalize any additional required adjusting entries and update the account balances.

b. Prepare multiple step income statement.

c. Calculate gross profit margin % and profit margin %. Compare with last year's margins and comment on the results. (Hint: You will have to calculate gross profit separately.)