The following unadjusted trial balance is prepared at fiscal year-end for Nelson
ID: 2487000 • Letter: T
Question
The following unadjusted trial balance is prepared at fiscal year-end for Nelson Company.
Cash..................................$1000
Merchandise Inventory......12,500
Store supplies...................5,800
Prepaid Insurance............2,400
Store equipment...............42,900
Accumulated depreciation - Store equipment...................$15,250
Accounts payable..............................................................10,000
Common Stock..................................................................5,000
Retained Earnings..............................................................27,000
Dividends.............................................2,200
Sales.................................................................................111,950
Sales discounts................................2,000
Sales returns and allowances..........2,200
Cost of goods sold............................38,400
Depreciation express- Store equipment......0
Salaries expense................................35,000
Insurance expense............................0
Rent expense....................................15,000
Store supplies expense......................0
Advertising expense.........................9,800
Totals......................................................$169,200.........................169,200
Rent expense and salaries expense are equally divided between selling activites and the general and administrative activities. Nelson Company uses a perpetual inventory system.
1. Prepare adjusting journal entries to reflect each of the following:
a. Store supplies still available at fiscal year-end amount to $1,750.
b. Expired insurance, an administrative expense, for the fiscal year is $1,400.
c. Depreciation expense on store equipment, a selling expense is $1,525 for the fiscal year.
d. To estimate shrinkage, a physical count of ending merchandise inventory is taken. It shows $10,900 of inventory is still available at fiscal year-end.
2. Prepare a multiple-step income statement for fiscal year 2015.
3. Comple the statement of retained earnings and the balance sheet.
4. Compute the current ratio, acid-test ratio, and gross margin ratio as of January 31, 2015. (Round ratios to two decimals.)
Explanation / Answer
Answer:1
Date
General Journal
Debit
Credit
Jan 31
Store supplies expense Dr.
4050
To store supplies
(5800 store supplies – 1750)
4050
Jan 31
Insurance Expense Dr.
1400
To prepaid insurance
1400
Jan 31
Depreciation expense – store equipment Dr.
1525
To Accumulated depreciation- store equipment
1525
Jan 31
Cost of goods sold Dr.
1600
To Merchandise inventory
(12500 merchandise inventory – 10900)
1600
Answer:2
Answer:3
Answer:4
Current ratio = Current assets/current liabilities
= 14650/10000 = 1.47
Acid- test ratio = Quick assets (cash)/current liabilities
= 1000/10000 = 0.1
Gross margin ratio = Gross margin/ net sales
=67750/107750 = 0.63
Date
General Journal
Debit
Credit
Jan 31
Store supplies expense Dr.
4050
To store supplies
(5800 store supplies – 1750)
4050
Jan 31
Insurance Expense Dr.
1400
To prepaid insurance
1400
Jan 31
Depreciation expense – store equipment Dr.
1525
To Accumulated depreciation- store equipment
1525
Jan 31
Cost of goods sold Dr.
1600
To Merchandise inventory
(12500 merchandise inventory – 10900)
1600
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