10. The following unadjusted trial balance is prepared at fiscal year-end for Ne
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Question
10. The following unadjusted trial balance is prepared at fiscal year-end for Nelson Company.
Rent expense and salaries expense are equally divided between selling activities and general and administrative activities. Nelson Company uses a perpetual inventory system.
Additional Information:
Store supplies still available at fiscal year-end amount to $2,300.
Expired insurance, an administrative expense, for the fiscal year is $1,750.
Depreciation expense on store equipment, a selling expense, is $1,600 for the fiscal year.
To estimate shrinkage, a physical count of ending merchandise inventory is taken. It shows $10,600 of inventory is still available at fiscal year-end.
Prepare a single-step income statement for fiscal year 2017.
Compute the current ratio, acid-test ratio, and gross margin ratio as of January 31, 2017. (Round your answers to 2 decimal places.)
NELSON COMPANYUnadjusted Trial Balance
January 31, 2017 Debit Credit Cash $ 4,500 Merchandise inventory 14,000 Store supplies 5,800 Prepaid insurance 2,600 Store equipment 42,500 Accumulated depreciation—Store equipment $ 17,600 Accounts payable 14,000 Common stock 3,400 Retained earnings 17,000 Dividends 2,050 Sales 115,500 Sales discounts 2,050 Sales returns and allowances 2,300 Cost of goods sold 38,000 Depreciation expense—Store equipment 0 Salaries expense 31,000 Insurance expense 0 Rent expense 13,000 Store supplies expense 0 Advertising expense 9,700 Totals $ 167,500 $ 167,500
Explanation / Answer
Single Step Income Statement for Nelson Company as of January 31, 2017
1) Current Ratio = Current Assets/Current Liabilities
= (Cash+Inventory+Supplies+Prepaid Insurance)/Accounts Payable
= 18,250/14,000
= 1.30
2) Acid-Test Ratio
= (Cash+Supplies+Prepid Insurance)/Accounts Payable
= 7,650/14,000
= 0.55
3) Gross Margin Ratio
= Gross Profit/Net Sales * 100
= (Net Sales - COGS)/Net Sales * 100
= 73,150/111,150 * 100
= 65.81%
Particulars Amount Revenues Net Sales (Sales less discount and returns) 111,150 (115500-2050-2300) Expenses Cost of goods sold 38,000 Depreciation Expense - Store Equipmrnt 1,600 Salaries Expense 31,000 Insurance Expense 1,750 Rent Expense 13,000 Advertising Expense 9,700 Store Supplies Expense (5800-2300) 3,500 Dividends 2,050 Total Expenses 100,600 Net Profit (Revenues - Expenses) 10,550Related Questions
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