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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 o Baking supplies: $27,850 ending inventory Equipment: Straight line method used for equipment o Mixing machine: $5,000 initial cost, $500 salvage value, 3rd year of use of 7 total ($642.86 per year) o Ovens: $8,000 initial cost, $1,000 salvage value, 3rd year of use of 7 total ($1,000 per year) o Other depreciable equipment: $4,000 initial cost, $0 salvage value, 1st year of use of 4 total ($1,000 per year) o Bakery Leasehold Improvements: $10,000, 2nd year of use ($2,000 per year) o 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. o 60 employees with a daily pay of $5,700. All receive pay through December 31. Financing: o 6% interest note payable was made on January 31, 2017, and is due February 1, 2019. o 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 Income Statement For Year Ending 12/31/2017 Bakery Sales Merchandise Sales Total Revenues - Cost of Goods Sold (FIFO) Baking Cost of Goods Sold Gross Profit (FIFO) - Operating Expenses: Rent Expense Interest Expense Insurance Expense Depreciation Expense Amortization Expense Misc. Expense Office Supplies Expense Business License Expense Advertising Expense Wages Expense Telephone Expense Total Operating Expenses: - Net Income (FIFO) - Peyton Approved
Trial Balance
2017
	Unadjusted trial balance		Adjusting entries		Adjusted trial balance
Account	Debit	Credit	Debit	Credit	Debit	Credit
Cash	55,428.00				55,428.00
Baking Supplies	165,250.00				165,250.00
Merchandise Inventory (FIFO)	25,750.00				25,750.00
Prepaid Rent	7,500.00				7,500.00
Prepaid Insurance	2,400.00				2,400.00
Baking Equipment	26,000.00				26,000.00
Accumulated Depreciation		3,000.00				3,000.00
Leasehold Improvements	10,000.00				10,000.00
Accumulated Amortization		2,000.00				2,000.00
Trademark	2,300.00				2,300.00
Office Supplies	1,600.00				1,600.00
Accounts Receivable	30,401.00				30,401.00
Notes Payable		10,000.00				10,000.00
Interest Payable						-
Accounts Payable		27,325.00				27,325.00
Wages Payable						-
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					-
Rent Expense	90,000.00				90,000.00
Interest Expense					-
Insurance Expense					-
Depreciation Expense					-
Amortization Expense					-
Misc. Expense	2,780.00				2,780.00
Office Supplies Expense					-
Business License Expense	375.00				375.00
Advertising Expense	5,200.00				5,200.00
Wages Expense					-
Telephone Expense	3,456.00				3,456.00
Merchandise COGS (FIFO)	15,760.00				15,760.00
Total: (FIFO)	464,200.00	464,200.00	-	-	464,200.00	464,200.00

Prepare an income statement for your company by completing the Income Statement tab in the provided workbook.

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