The following unadjusted trial balance is prepared at fiscal year-end for Nelson

Question

The following unadjusted trial balance is prepared at fiscal year-end for Nelson Company NELSON COMPANY Unadjusted Trial Balance January 31, 2017 Debit Credit Cash Merchandise inventory Store supplies Prepaid insurance Store equipment Accumulated depreciation-Store equipment Accounts payable Common stock Retained earnings Dividends Sales Sales discounts Sales returns and allowances Cost of goods sold Depreciation expense-Store equipment Salaries expense Insurance expense Rent expense Store supplies exp Advertising expense Totals $4,500 14,000 5,800 2,600 42,500 17,600 14,000 3,400 17,000 2,050 115,500 2,050 2,300 38,000 31,000 13,000 9,700 ense $167,500 $167,500 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:

Explanation / Answer

Current assets Current Liabilities Cash 4500 Merchandise Inventory 10600 Store Supplies 2300 Prepaid Insurance 850 Accounts Payable 14000 Total 18250 14000 Net sales 111150 Cost of goods sold 38000 Gross margin 73150 Current ratio Current assets/Current iabilities 1.30 (18250/14000) Acid-test Ratio (Current assets – Inventory) / Current Liabilities 0.55 (18250-10600)/14000 Gross Margin ratio Gross margin / Net sales 0.66

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