Question

Scenario for adjusting entries: Year end is December 31, 2017. Peyton Baking Company uses the following accounting practices:

Inventory: Periodic, FIFO for both baking and merchandise

Baking supplies: $27,850 ending inventory

Equipment: Straight line method used for equipment

Mixing machine: $5,000 initial cost, $500 salvage value, 3rd year of use of 7 total ($642.86 per year)

Ovens: $8,000 initial cost, $1,000 salvage value, 3rd year of use of 7 total ($1,000 per year)

Other depreciable equipment: $4,000 initial cost, $0 salvage value, 1st year of use of 4 total ($1,000 per year)

Bakery Leasehold Improvements: $10,000, 2nd year of use ($2,000 per year)

Trademark for company name: Initial cost, $2,300, 3rd year of use

Office supplies: Periodic, FIFO. Ending balance is $250.

Pay period is every 2 weeks. Last pay period ended December 27

60 employees with a daily pay of $5,700. All receive pay through December 31.

Financing:

6% interest note payable was made on January 31, 2017, and is due February 1, 2019.

5-year loan was made on June 1, 2017. Terms are 7.5% annual rate, interest only until due date.

Insurance: Annual policy covers 12 months, purchased in February, covering March 2017– February 2018. No monthly adjustments have been made.

Other information: An employee slipped and fell in the baking area and has filed a lawsuit. The company lawyer indicates that it is probable that the company will be found liable. No additional information is available.

Peyton Approved
Trial Balance
2017
	Unadjusted trial balance		Adjusting entries		Adjusted trial balance
Account	Debit	Credit	Debit	Credit	Debit	Credit
Cash	64,713.72				64,713.72
Baking Supplies	165,250.00			137,400.00	27,850.00
Merchandise Inventory (FIFO)	25,750.00				25,750.00
Prepaid Rent	7,500.00				7,500.00
Prepaid Insurance	2,400.00			2,000.00	400.00
Baking Equipment	17,000.00				17,000.00
Accumulated Depreciation		3,285.72		2,642.86		5,928.58
Leasehold Improvements	10,000.00				10,000.00
Accumulated Amortization		2,000.00		2,000.00		4,000.00
Trademark	2,300.00				2,300.00
Office Supplies	1,600.00			1,350.00	250.00
Accounts Receivable	30,401.00				30,401.00
Notes Payable		10,000.00				10,000.00
Interest Payable				1,468.75		1,468.75
Accounts Payable		27,325.00				27,325.00
Wages Payable				22,800.00		22,800.00
Loans Payable		21,000.00				21,000.00
Common Stock		30,000.00				30,000.00
Dividends	20,000.00				20,000.00
Bakery Sales		335,675.00				335,675.00
Merchandise Sales		35,200.00				35,200.00
Baking Cost of Goods Sold			137,400.00		137,400.00
Rent Expense	90,000.00				90,000.00
Interest Expense			1,468.75		1,468.75
Insurance Expense			2,000.00		2,000.00
Depreciation Expense			2,642.86		2,642.86
Amortization Expense			2,000.00		2,000.00
Misc. Expense	2,780.00				2,780.00
Office Supplies Expense			1,350.00		1,350.00
Business License Expense	375.00				375.00
Advertising Expense	5,200.00				5,200.00
Wages Expense			22,800.00		22,800.00
Telephone Expense	3,456.00				3,456.00
Merchandise COGS (FIFO)	15,760.00				15,760.00
Total	464,485.72	464,485.72	169,661.61	169,661.61	493,397.33	493,397.33

Please complete the statement of retained earnings:

Peyton Approved
Statement of Retained Earnings
For Year Ending 12/31/2017
	Beginning Balance:		-
	plus Net Income
	less Dividends:
	Ending Balance:		-

Please complete the balance sheet:

Peyton Approved
Balance Sheet
As of December 31, 2017
Assets					Liabilities and Owners' Equity
	Current Assets:					Current Liabilities:
	Cash					Accounts Payable
	Baking Supplies					Wages Payable
	Merchandise Inventory (FIFO)					Interest Payable
	Prepaid Rent					Total Current Liabilities		-
	Prepaid Insurance
	Office Supplies					Long Term Liabilities:
	Accounts Receivable					Notes Payable
	Total Current Assets		-			Loans Payable
						Total Long Term Liabilities:		-
						Total Liabilities:		-
	Long Term/Fixed Assets:
	Baking Equipment					Common Stock
	Accumulated Depreciation					Retained Earnings
			-
	Leasehold Improvements					Total Equity		-
	Accumulated Amortization		-
	Trademark
	Total Assets:		-			Total Liabilities & Equity		-

Answer 1