Reference no: EM132784309

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%.

Instructions

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

problem b. Prepare multiple step income statement.

problem 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.)