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 $ 23,950 Merchandise inventory 12,500 Store supplies 5,500 Prepaid insurance 2,500 Store equipment 42,800 Accumulated depreciation—Store equipment $ 16,100 Accounts payable 16,000 Common stock 3,000 Retained earnings 35,000 Dividends 2,300 Sales 116,600 Sales discounts 1,950 Sales returns and allowances 2,200 Cost of goods sold 38,000 Depreciation expense—Store equipment 0 Sales salaries expense 15,750 Office salaries expense 15,750 Insurance expense 0 Rent expense—Selling space 7,000 Rent expense—Office space 7,000 Store supplies expense 0 Advertising expense 9,500 Totals $ 186,700 $ 186,700 Additional Information: Store supplies still available at fiscal year-end amount to $2,550. Expired insurance, an administrative expense, is $1,750 for the fiscal year. Depreciation expense on store equipment, a selling expense, is $1,500 for the fiscal year. To estimate shrinkage, a physical count of ending merchandise inventory is taken. It shows $10,100 of inventory is still available at fiscal year-end. Problem 4-5A Parts 1, 2 and 3 Required: 1. 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.

Answer 1