Question

The Panama Pajama Company began operations on January 1, 2015, and is now in its third year of operations.
The adjusted trial balance as of December 31, 2018 appears below, along with prior year balance sheet data and some additional transaction data for 2018.
	THE PANAMA PAJAMA COMPANY
	Adjusted Trial Balance
	12/31/18
		2018		2017
	Account Title	Adjusted Trial Balance		Balance Sheet Info
		Debit	Credit	Debit	Credit
	Cash	$        137,100		$       35,700
	Accounts Receivable	12,000		11,000
	Inventory	4,400		5,600
	Office Equipment	26,000		20,000
	Machinery & Tools	59,000		21,000
	Accumulated Depreciation—Plant Assets		$            8,600		6,000
	Accounts Payable		12,200		9,800
	Note Payable—Short Term		10,000		15,500
	Note Payable—Long Term		33,000		-
	Common Stock, $10 par		150,000		50,000
	Retained Earnings		????		12,000
	Dividends	1,000
	Sales Revenue		30,700				-
	Cost of Goods Sold	11,600
	Rent Expense	2,000
	Advertising Expense	800
	Depreciation Expense	2,600
		$        256,500	$        244,500
	Transaction Data for 2018 (Note, these transactions were included in the trial balance numbers above.)
	Cash paid for purchase of office equipment	$            6,000
	Cash paid for purchase of tools	5,000
	Acquisition of Machinery with Notes Payable—Long-term	33,000
	Cash payment of dividends	1,000
	Cash receipt from issuance of 10,000 shares of common stock	100,000
Requirements: (See sheet tabs at bottom. Use each sheet for the following requirements.)
Use Excel Skills in completing these requirements. You must use formulas and functions, cell references, and professional formatting.
1.	Prepare the Panama Pajama Company multi-step income statement for the year ended December 31, 2018. Include the EPS at the bottom.
	Also include a vertical analysis column at the right and perform a vertical analysis of the income statement. (Use percentage format with 1 decimal place.)
2.	Prepare the Panama Pajama Company balance sheet for December 31, 2018. Include a vertical analysis column at the right
	and perform a vertical analysis of the balance sheet. (Use the percentage format with 1 decimal place.)
3.	Prepare the Panama Pajama Company statement of cash flows for the year ended December 31, 2018. Use the indirect method.
4.	Complete the analysis of the financial statements as directed on the Analysis sheet.

Answer 1

Sales		30700
Cost of Goods Sold		11600
Gross Profit		19100
Operating Expenses
Rent Expense	2000
Advertising Expense	800	2800
Operating Income before Depreciation and Interest		16300
Depreciation Expense	2600
		2600
Interest Income		0
Net Income from Continuing Operations		13700
Income from Discontinued Operations net of tax		0
Net Income		13700
EPS =	Net Income – Preferred dividends
	Weighted Average Number of Common Stock EPS = 0.91
			Account Title Balance Sheet Assets Liabilities Cash 137100 0 Accounts Receivable 12000 0 Inventory 4400 0 Office Equipment 26000 0 Machinery & Tools 59000 0 Accumulated Depreciation—Plant Assets 0 8600 Accounts Payable 0 12200 Note Payable—Short Term 0 10000 Note Payable—Long Term 0 33000 Common Stock, $10 par 0 150000 Retained Earnings 24700 Total 238500 238500 Cash Flow Statement Cash at the biginning period $35,700 Cash flows from operating activities: 0 Net income 13,700 Depreciation expense 2,600 Decrease in Inventory 1,200 Gain on sale of land 0 Increase in accounts receivable -1,000 Increase in accounts payable 2,400 Increase in Long-Term Notes Payable 33,000 Decrease in Short-Term Notes Payable -5,500 Increase in Machinery Tools -38,000 Increase in Equipment -6,000 Cash flows from investing activities: 0 Sale of land 0 Cash flows from financing activities: 0 Proceeds from issuing stock 1,00,000 Dividends on common -1,000 0 0 Cash at the ending period Dec. 31, 2018 137100