Question

Credit NELSON COMPANY Unadjusted Trial Balance January 31 Debit $ 1,000 12,500 5,800 2,400 42,900 $ 15,250 10,000 32,000 2,200 111,950 Cash Merchandise inventory Store supplies Prepaid insurance Store equipment Accumulated depreciation-Store equipment Accounts payable J. Nelson, Capital J. Nelson, Withdrawals Sales Sales discounts Sales returns and allowances Cost of goods sold Depreciation expense-Store equipment Sales salaries expense Office salaries expense Insurance expense Rent expense-Selling space Rent expense-Office space Store supplies expense Advertising expense Totals 2,000 2,200 38,400 0 17,500 17,500 0 7,500 7,500 9,800 $169,200 $169,200 Required 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 the year ended January 31 that begins with gross sales and includes separate categories for net sales, cost of goods sold, selling expenses, and general ar administrative expenses. 3. Prepare a single-step income statement for the year ended January 31. 21 ( und ratios to

Please help with 1-3. Thanks

Answer 1

Adjusting entries are the entries made for adjusting the revenue and expenses for the period in which they are incurred. It is done at the end of the accounting period after preparing the unadjusted trail balance.

Multi-step Income Statement is an statement in which shows the gross profit (Sales less Cost of good sold) and operating profit (gross profit less operating expenses) whereas in Single step only net income is shown. No bifurcation of net income between gross profit and operating profit.

Step 1 Adjusting Entries Date Jan 31 Step2 Before making income statement adjusted trial balance is be made Debit $4,050 Credit Particulars NELSON COMPANY Store supplies expense Store supplies To Record Sre supplies expense) Insurance Expense Prepaid Insurance (To Record insurance expense) Depreciation expense-Store equipment Accumulated depreciation-Store equipment To Record depreciation expense) Cost of goods sold Merchandise inventory (To Record cost of good sold) Unadjusted Trial Balance Adjusted Trial Balance Adjustment $4,050 Particulars Jan 31 Jan 31 Debit Credit Credit Debit Debit Credit Jan 31 $1,400 Cash Merchandise inventory Store supplies Prepaid insurance Store equipment Accumulated depreciation-Store equipment Accounts payable J.Nelson Capital J.Nelson Withdrawals Sales Sales discounts Sales returns and allowances Cost of goods sold Depreciation expense-Store equipment Sales Salaries expense Office Salaries expense $1,000 $12,500 $0 $0 $1,000 $10,900 $1,750 $1,000 $42,900 $1,400 $0 $1,600 $4,050 $1,400 $0 $1,525 $0 $5,800 $2,400 $42,900 $0 $0 $0 $0 Jan 31 $1,525 $1,525 $15,250 $10,000 $32,000 $16,775 $10,000 $32,000 Jan 31 $1,600 $0 $0 $0 $1,600 $2,200 $2,200 $0 $0 $0 $1,11,950 $0 $1,11,950 Working $2,000 $2,200 $40,000 1 Store supplies expense $2,000 $0 $5,800 ($1,750) $4,050 $2,200 $38,400 $0 $17,500 $17,500 $0 $7,500 $7,500 $0 $9,800 $1,69,200 $0 $1.600 $0 Unadjusted Store Supplies Expense Less: Closing Balance Store supplies expense $0 $0 $0 $1,525 $0 $0 $1,400 $0 $0 $4,050 $0 $8,575 $1,525 $17,500 $17,500 $1,400 $7,500 $7,500 $4,050 $9,800 $1,70,725 $0 $0 $0 $0 $0 2 Cost of Good Sold $12,500 ($10,900) $1,600 Insurance expense Unadjusted Merchandise inventory Less: Closing Balance Rent expense-selling space Rent expense office space Store supplies expense Advertising expense Cost of Good Sold $0 $8,575 $1,69,200 $1,70,725

Ans 2 NELSON COMPANY Ans 3 NELSON COMPANY Income Statement for the year ended 31st January Income Statement for the year ended 31st January Particulars Revenue Particulars Amount Amount Amount Amount Sales Less: Sales discounts Less: Sales returns and allowances Net Sales Revenue Less: Cost of Good Sold Gross Profit Less: Selling, and Administrative Exp Selling Expense Advertising expense $1,11,950 ($2,000) ($2,200) $1,11,950 ($2,000) ($2,200) Sales Less: Sales discounts $1,07,750 ($40,000) $67,750 Less: Sales returns and allowances Net Revenue $1,07,750 Less: Expenses $40,000 $9,800 Cost of Good Sold Advertising expense Depreciation expense-Store equipmen Sales Salaries expense $9,800 $1,525 $17.500 $1,525 $17,500 $4,050 $7,500 $17,500 $7,500 $1,400 Depreciation expense-Store equipment Sales Salaries expense Store supplies expense Rent expense Office Space Office Salaries expense $4,050 $7,500 Store supplies expense Rent expense Store Space General and Administrative Expenses Office Salaries expense Rent expense Office Space $17,500 $7,500 $1,400 Insurance expense Rent expense Office Space ($1,06,775) $975 Total Expenses Net Income Insurance expense Total Selling and Administrative Exp Operating Income ($66,775) $975