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.

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 fiscal year 2018 that begins with gross sales and includes separate categories for net sales, cost of goods sold, selling expenses, and general and administrative expenses.

3. Prepare a single-step income statement for fiscal year 2018.

4. Compute the current ratio, acid-test ratio, and gross margin ratio as of January 31, 2018.

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NELSON COMPANY Unadjusted Trial Balance January 31, 2018 Debit Crodit $ 1,000 2 Cash 3 Merchandise inventory 4 Store supplies 5 Prepaid insurance 6 Store equipment 7 Accumulated depreciation-Store equipment 8 Accounts payable 9 Common stock 10 Retained earnings 12,500 5,800 2,400 42,900 $ 15,250 10,000 5,000 27,000 11 Dividends 12 |Sales 13 Sales discounts 14 Sales returns and allowances 15 Cost of goods sold 16 Depreciation expense-Store equipment 17 Salaries expense 18 Insuranco oxponso 2,200 111,950 2,000 2,200 38,400 35,000 19 Rent expense 20 Store supplies expense 21 Advertising expense 22 Totals 15,000 9,800 $169,200 $169,200