Perfect Pizza had the following account balances at December 31, 2010:

Cash…………………………................……………………    $ 33,000

Accounts receivable………….........……………………     15,000

Ingredients and supplies inventory……….………     10,000

Prepaid rent………………………...............……….………     3,000

Equipment…………………………..............……...………     60,000

Accumulated depreciation—equipment..………..    30,000

Delivery vehicles………………………….........................   80,000

Accumulated depreciation—delivery vehicle..…    36,000

Accounts payable…………………………….............…….    7,000

Wages payable……………………………...............………..   2,000

Share capital……………………………............…………..  110,000

Retained earnings…………………………........………..     16,000

During 2011, the following transactions occurred:

1. Purchases of ingredients and supplies (ingredients and supplies inventory) were $230,000, all on account.

2. Sales of pizzas for cash were $510,000, and sales of pizzas on account were $40,000.

3. The company paid $88,000 for wages and $42,000 for other expenses.

4. Payments for ingredients and supplies purchased on account totalled $220,000.

5. Collections from customers for sales on account totalled $50,000.

6. Ingredients and supplies valued at $225,000 were used in making pizzas.

7. A dividend of $1 5,000 was declared and paid at the end of the year. Information for adjusting entries:

8. At the end of 2011, the amount of rent paid in advance was $1,500.

9. Wages owed to employees at the end of 2011 were $2,500.

10. The equipment had an estimated useful life of eight years, with no residual value.

11. The delivery vehicles had an estimated useful life of six years with a residual value of $8,000.

Required:

a. Prepare journal entries for transactions 1 through 7. Create new accounts as necessary.

b. Set up T accounts. Enter the beginning balances from 2010, post the 2011 journal entries, and determine the unadjusted balance in each account.

c. Prepare a trial balance.

d. Prepare journal entries for adjustments 8 through 11. Post these journal entries to the T accounts, and determine the adjusted balance in each account.

e. Prepare an adjusted trial balance.

f. Prepare a statement of earnings and statement of financial position for 2011.