1) 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 depreciationequipment

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

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.)