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The fiscal year-end unadjusted trial balance for Nelson Company is found on the trial balance tab....

The fiscal year-end unadjusted trial balance for Nelson Company is found on the trial balance tab.

Rent expense and salaries expense are equally divided between selling activities and general and administrative activities. Nelson Company uses a perpetual inventory system.

Descriptions of items that require adjusting entries on January 31, 2018, follow.

  1. Store supplies still available at fiscal year-end amount to $1,750.
  2. Expired insurance, an administrative expense, for the fiscal year is $1,400.
  3. Depreciation expense on store equipment, a selling expense, is $1,525 for the fiscal year.
  4. 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.

General Journal tab - Prepare any necessary adjusting entries.
General Ledger tab - One of the advantages of general ledger software is that posting is done automatically. To see the detail of all transactions that affect a specific account, or the balance in an account at a specific point in time, click on the General Ledger tab.
Trial Balance tab - General ledger software also automates the preparation of trial balances. A trial balance lists each account from the General Ledger, along with its balance, either a debit or a credit. Total debits should always equal total credits.
Multiple step Income Statement tab - Prepare a multiple step income statement.
Single-step Income Statement tab - Prepare a single-step income statement using the values from the multiple-step income statement.
Balance Sheet tab - Prepare a classified balance sheet.
Ratio tab - Calculate the current ratio, the acid-test ratio, and the gross margin ratio.

For transactions 1-4 prepare the required adjusting journal entries. For transaction 5-8, prepare the required closing entries.

  • 1

    a.) Store supplies still available at fiscal year-end amount to $1,750.

  • 2

    b.) Expired insurance, an administrative expense, for the fiscal year is $1,400.

  • 3

    c.) Depreciation expense on store equipment, a selling expense, is $1,525 for the fiscal year.

  • 4

    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.

  • 5

    Record the entry to close income statement accounts with credit balances.

  • 6

    Record the entry to close income statement accounts with debit balances.

  • 7

    Record the entry to close income summary.

  • 8

    Record the entry to close the dividends account

Each journal entry is posted automatically to the general ledger. Think of the general ledger as sorting all of your journal entries by account title. Click on any of the individual amounts to return to the underlying journal entry.

Show less

UnadjustedAdjustedPost-closing

Unadjusted

The trial balance is a listing of all account balances from the General Ledger as of a specific date. Click on any individual account balance to return to the General Ledger. The trial balance is only as accurate as the underlying journal entries. If the total debits do not equal the total credits, you have a journal entry that is out of balance. If you have an abnormal ending balance (indicated with brackets in the general ledger), you should review the journal entries that affected that account to ensure that the journal entries are correct.

Begin by selecting "Adjusted" from the drop-down below. Then, use the adjusted trial balance to prepare a multiple-step income statement. Rent expense and salaries expense are equally divided between selling activities and the general and administrative activities.

A single-step income statement yields the same net income, but does not show the same level of detail/subtotals as the multiple-step income statement. Use the information from the multiple-step income statement to complete the single-step income statement below.

UnadjustedAdjustedPost-closing

Unadjusted


Prepare a classified balance sheet as of January 31, 2018.

UnadjustedAdjustedPost-closing

Unadjusted


Compute the following ratios as of January 31, 2018. Round each ratio to 2 decimal places.


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Answer #1

Solution:-

Nelson Company Adjusting Enteries Date Particulars DebitCredit Jan-31 Store Supplies Expense a/c To Store Supplies 섹riO Jan-31 Insurance Expense a/c 1400 To Prepaid Insurance 1400 Jan-31 Depreciation Expense a/c 1525 1525 Jan-31 Cost of goods sold a/c 1600 To Merchandise Inventory 1600Closing Enteries Date Particulars Debit Credit Jan-31 Income Summary a/c 110975 To Sales Discount To Sales returns and allowances To Cost of goods sold To Salaries Expense To Rent Expense To Advertising Expense To Store Supplies Expense To insurance Expense To Depreciation Expense 2000 2200 40000 35000 15000 9800 4050 1400 1525 Jan-31 Sales a/c Dr. 111950 To Income Summa 111950 Jan-31 Income Summary a/c Dr. 975 To Retained Earnings 975 Retained Earnings a/c To Dividends Jan-31 Dr. 2200 2200Statement of Income For the year ended 31.1.201:7 Sales Sales Discount Sales returns and allowances Net Sales Cost of goods sold Gross Profit 111950 2000 2200 107750 -40000 67750 Salaries Expense Rent Expense Advertising Expense Store Supplies Expense Insurance Expense Depreciation Expense Net Income 35000 15000 9800 4050 1400 152566775 975 Statement of Retained Earnings For the year ended 31.1.201:7 1.1.2017 Net Income 27000 975 27975 2200 25775 Less:DividendsBalance sheet As at 31.1.2017 Assets Current Assets Cash Merchandise Inventory Store Supplies Prepaid Insurance Amounts in$ Amounts in $ Liabilities Amounts in $ Amounts in $ Current Liabilities Accounts Payable 1000 10900 1750 1000 10000 14650 Shareholders Equity Common Stock Retained Earnings Non Current Assets Store Equipment Accumulated Depreciation Total Assets 5000 42900 25775 30775 16775 26125 40775 Total Liabilities &equity 40775

Current ratio = Current assets / current Liabilities
Current assets 14650
Current Liabilities 10000
Current ratio 1.47
2 Acid test ratio = (current assets - inventory )/ current liabilities
Acid test 3750 (14650-10900)
Current liabilities 10000
Acid test ratio 0.38
3 Gross margin percentage = Gross margin / sales
Gross margin 67750
Sales 107750
Gross margin % 62.88%
3 1
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