The following unadjusted trial balance is prepared at fiscal year-end for Nelson
ID: 2546413 • Letter: T
Question
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 $1,850.
Expired insurance, an administrative expense, for the fiscal year is $1,750.
Depreciation expense on store equipment, a selling expense, is $1,525 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.
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.
Unadjusted Trial Balance
January 31, 2017 Debit Credit Cash $ 6,150 Merchandise inventory 15,000 Store supplies 5,700 Prepaid insurance 2,700 Store equipment 42,600 Accumulated depreciation—Store equipment $ 17,550 Accounts payable 14,000 J. Nelson, Capital 18,000 J. Nelson, Withdrawals 2,100 Sales 115,250 Sales discounts 1,850 Sales returns and allowances 2,100 Cost of goods sold 38,000 Depreciation expense—Store equipment 0 Salaries expense 25,800 Insurance expense 0 Rent expense 13,000 Store supplies expense 0 Advertising expense 9,800 Totals $ 164,800 $ 164,800
Explanation / Answer
Answer:
1
Using the above information prepare adjusting journal entries:
Date
General Journal
Debit
Credit
31-Jan
Store supplies expense (5700-1850)
3,850
Store supplies
3,850
31-Jan
Insurance expense
1,750
Prepaid insurance
1,750
31-Jan
Depreciation expense—Store equipment
1,525
Accumulated depreciation—Store equipment
1,525
31-Jan
Cost of goods sold (15000-10600)
4,400
Merchandise inventory
4,400
____________________________________________
2. Prepare a multiple-step income statement for fiscal year 2017
NELSON COMPANY
Income Statement
For Year Ended January 31, 2017
Sales
$115,250
Less: Sales discounts
$1,850
Less: Sales returns and allowances
2,100
3,950
Net sales
111,300
Cost of goods sold
42,400
Gross profit
68,900
Expense
Selling expenses
Depreciation expense—Store equipment
1,525
Sales salaries expense
12,900
Rent expense—Selling space
6,500
Store supplies expense
3,850
Advertising expense
9,800
Total selling expenses
34,575
General and administrative expenses
Insurance expense
1,750
Office salaries expense
12,900
Rent expense— Office space
6,500
Total general and administrative expenses
21,150
Total expenses
55,725
Net income
$13,175
__________________________________________________
.
3. Prepare a single-step income statement for fiscal year 2017.
NELSON COMPANY
Income Statement
For Year Ended January 31, 2017
Net sales
$111,300
Expenses
Cost of goods sold
$42,400
Selling expenses
34,575
General and administrative expenses
21,150
Total expenses
98,125
Net income
$13,175
Date
General Journal
Debit
Credit
31-Jan
Store supplies expense (5700-1850)
3,850
Store supplies
3,850
31-Jan
Insurance expense
1,750
Prepaid insurance
1,750
31-Jan
Depreciation expense—Store equipment
1,525
Accumulated depreciation—Store equipment
1,525
31-Jan
Cost of goods sold (15000-10600)
4,400
Merchandise inventory
4,400
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