Question

The following unadjusted trial balance is prepared at fiscal year-end for Nelson Company. Nelson company uses a perpetual inventory system. It categorizes the following accounts as selling expenses: Depreciation Expense—Store Equipment, Sales Salaries Expense, Rent Expense—Selling Space, Store Supplies Expense, and Advertising Expense. It categorizes the remaining expenses as general and administrative.

NELSON COMPANY Unadjusted Trial Balance January 31
	Debit			Credit
Cash	$	22,150
Merchandise inventory		13,000
Store supplies		5,100
Prepaid insurance		2,800
Store equipment		42,800
Accumulated depreciation—Store equipment				$	19,250
Accounts payable					17,000
Common stock					4,000
Retained earnings					25,000
Dividends		2,100
Sales					115,900
Sales discounts		2,100
Sales returns and allowances		2,000
Cost of goods sold		38,000
Depreciation expense—Store equipment		0
Sales salaries expense		12,900
Office salaries expense		12,900
Insurance expense		0
Rent expense—Selling space		8,000
Rent expense—Office space		8,000
Store supplies expense		0
Advertising expense		9,300
Totals	$	181,150		$	181,150

Additional Information:

1. Store supplies still available at fiscal year-end amount to $2,350.
2. Expired insurance, an administrative expense, is $1,600 for the fiscal year.
3. Depreciation expense on store equipment, a selling expense, is $1,550 for the fiscal year.
4. 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.

. Using the above information, prepare adjusting journal entries.
2. Prepare a multiple-step income statement for the year ended January 31.
3. Prepare a single-step income statement for the year ended January 31.

Note: Enter debits before credits.

	Transaction General Journal Debit Credit

This chart is for each question

Answer 1

Date	General Journal	Debit	Credit
31-Jan	Store supplies expense	2,350
	Stores Supplies		2,350
31-Jan	Insurance expense	1,600
	Prepaid insurance		1,600
31-Jan	Depreciation Expense- Store equipment	1,550
	Accumulated depreciation- Store equipment		1,550
31-Jan	Cost of goods sold	2,400
	Merchandise Inventory		2,400
	13000-10600

multiple-step income statement
NELSON COMPANY Income Statement For Year Ended January 31
Sales		115,900
Less: Sales discounts	2,100
Less: Sales returns and allowances	2,000	4,100
Net sales		111,800
Cost of goods sold 38,000+2400		40,400
Gross Profit		71,400
Expense
Selling expenses
Advertising expenses	9,300
Depreciation expense-Store equipment	1,550
Rent expense-Selling space	8,000
Sales salaries expense	12,900
Store supplies expense	2,350
Total selling expenses	34,100
General and administrative expenses
Insurance expense	1,600
Office salaries expense	12,900
Rent expense-Office space	8,000
Total general and administrative expenses	22,500
Total expenses		56,600
Net Income		14,800

single-step income statement
NELSON COMPANY Income Statement For Year Ended January 31
Net sales		111,800
Expenses
General and administrative expenses	22,500
Selling expenses	34,100
Cost of goods sold	40,400
Total expenses		97,000
		14,800