Palm-West Products (C) 2 The companys yearly operating expenses(organized by cost behavior) are provided in Exhibit 2. For simplicity, the company assumes that all operating expenses are paid in cash during the year incurred, with the exception of depreciation and insurance expense. To simplify, assume no tax consequences. Unit Sales Forecasted Sales Volume 2006 2007 2008 Total 10,200 11,400 12,700 BASE 7,956 8,550 9,017 PREMIUM 2,244 2,850 3,683 Sales Price BASE 225 221 216 PREMIUM 372 365 358 Unit Cost BASE 155 155 155 PREMIUM 225 225 225 Exhibit 1. PWPs sales forecast and other sales information. Variable: Sales commissions (% of sales dollars) 5% of sales Shipping & handling (per unit sold) $15 per unit Fixed: (per year) Wages and salaries 315,000 Rent 26,000 Utilities 9,500 Insurance expired 4,500 Depreciation 16,000 Other S&A 38,000 Exhibit 2. PWPs planned operating expenses per year. Palm-West Products actual Adjusted Trial Balance (incomplete), as of December 31, 2006 is provided in Exhibit 3. Palm-West Products (C) 3 2006 Debit Credit Cash 40,000 Accounts Receivable 2,817,494 Inventory 1,474,875 Prepaid Insurance 15,500 Fixed Assets, net of depreciation 1,464,000 Accounts Payable 960,053 Line-of-Credit 234,297 Dividends Payable 0 Capital Stock 1,750,000 Retained Earnings 2,673,975 Sales Revenue Cost of Goods Sold Depreciation Expense Insurance Expense Rent Expense Sales Commissions Shipping & Handling Utilities Expense Wages and Salaries Expense Other S&A Expenses Totals Exhibit 3. PWPs Adjusted Trial Balance. 1.2 Requirements (in an Excel spreadsheet) 1. Complete the Adjusted Trial Balance in Exhibit 3 for 2006. 2. Prepare closing entries for 2006. 3. Prepare a Worksheet for 2006 with the following columns. a. Adjusted Trial Balance. b. Income Statement. c. Balance Sheet. d. Closing Entries. e. Post-Closing Trial Balance.