The following is a list of accounts and their balances for Casa Bella Interiors at May 31 before adjustments and some additional data for the fiscal year ended May 31, 2010.
Casa Bella Interiors
Accounts and balances
May 31, 2010
Cash ................ $ 4,300
Accounts receivable .......... 9,300
Notes receivable ............ 1,000
Interest receivable .......... —
Prepaid rent ............. 1,700
Supplies ................ 400
Office equipment ........... 23,400
Accumulated depreciation ....... (1,600)
(office equipment)
Accounts payable ........... 500
Salaries payable ........... —
Interest payable ........... —
Unearned service revenue ....... 2,600
Long-term notes payable ....... 8,400
Common stock ........... 5,000
Additional paid-in capital ....... 2,300
Retained earnings .......... 5,000
Service revenue ...........19,800
Salary expense ............ 4,650
Rent expense
Depreciation expense
Advertising expense ......... 450

Additional data follow:
• Depreciation on the office equipment for the year is $500.
• Salaries owed to employees at year end but not yet recorded or paid total $750.
• Prepaid rent that has expired at year-end amounts to $800.
• Interest due at year end on the notes receivable is $120.
• Interest owed at year end on the notes payable is $840.
• Unearned service revenue that has actually been earned by year end totals $1,500.

Requirements
1. For each account, show the adjustment needed at year end.
2. Prepare an income statement for the year ended May 31, 2010, and a balance sheet at May 31, 2010.
3. Calculate the firm’s profit margin on sales ratio for the year.