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 $ 6,500 14,500 5,700 2,400 42,900 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 expense Advertising expense Totals $ 19,550 14,000 3,200 16,000 114,850 2,000 2,200 38,000 26,100 16,000 9,300 $167,600 $167,600 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 a. Store supplies still available at fiscal year-end amount to $1,700 b. Expired insurance, an administrative expense, for the fiscal year is $1,700 c. Depreciation expense on store equipment, a selling expense, is $1,600 for the fiscal year d. To estimate shrinkage, a physical count of ending merchandise inventory is taken. It shows $10,600 of inventory is still available at fiscal vear-end Problem 4-5A Part 1, 2 and 3 Required 1. Using the above information prepare adjusting journal entries 2. Prepare a multiple-step income statement for fiscal year 2017 3. Prepare a single-step income statement for fiscal year 2017

Explanation / Answer

JOURNAL ENTRIES Date Accounts title and explanations Debit $ Credit $ a Supplies expense Dr. 4000    Supplies 4000 b Insurance Expense Dr. 1700     Prepaid Insurance 1700 c Depreciation expense 1600     Accumulated Depreciation 1600 d Cost of Goods sold Dr. 3900     Merchandise Inventory 3900 Req 2 STATEMENT OF INCOME Amount $ Sales 114850 Less: Sales return 2200 Less: sales discount 2000 Net sales revenue 110,650 Cost of Goods sold 41,900 Gross margin 68,750 Less: Operating expense Selling expense Advertisement 9300 Store supplies 4000 Depreciation 1600 14,900 Admin expense Salaries expense 26100 Insurance Expennse 1700 Rent expense 16000 43800 Net income before tax 10050 STATEMENT OF INCOME Amount $ Sales 114850 Less: Sales return 2200 Less: sales discount 2000 Net sales revenue 110,650 Less: Expense Cost of Goods sold 41900 Advertisement 9300 Store supplies 4000 Depreciation 1600 Salaries expense 26100 Insurance Expennse 1700 Rent expense 16000 100600 Net income before tax 10050

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