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Panaka Company Financials

The completed financial statement columns of the worksheet for Panaka Company are shown below...
(a) Prepare an income statement, a retained earning statement, and a classfied balance sheet. (b) Prepare the closing entires.
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The first question wants you to prepare an income statement and a balance sheet for a company, which is making a loss, and then it wants you to show the closing entries for the final accounts. The second question wants you to make certain journal entries of the transactions given to you.
<br>There are several assumptions, which the questions make; first the question assumes that there are no adjustments to be made at the time of preparation of the income statement and the balance sheet. This is not the norm; there are usually some adjustments with regards to bad debts, income outstanding or received in advance or expenses outstanding. Second the journal question wants you to journalize using the perpetual inventory system, true, however in its chart of accounts it does not mention purchase account, does it mean that every purchase that is made is debited to Merchandize Inventory account? However, every sales transaction needs to be credited to No. 401 Sales account. I have used the standard terminology for the templates please use the terminology, which your instructor requires you to use.
<br>Given below is a template to help you answer the questions.
<br>(For all accounts going to the expense side of the income statement)
<br>Debit Income Statement ...