The following unadjusted trial balance is prepared at fiscal year-end for Foster Products Company.

Rent expense and salaries expense are equally divided between selling activities and general and administrative activities. Foster Products 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 $3,700.

b. Expired insurance, an administrative expense, for the fiscal year is $2,800.

c. Depreciation expense on store equipment, a selling expense, is $3,000 for the fiscal year.

d. To estimate shrinkage, a physical count of ending merchandise inventory is taken. It shows $21,300 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 October 31, 2018.

Transcribed Image Text:

FOSTER PRODUCTS COMPANY Unadjusted Trial Balance October 31, 2018 Credit Debit $ 7,400 Cash Merchandise inventory 24,000 4 Store supplies 5 Prepaid insurance 6 Store equipment 7 Accumulated depreciation-Store equipment 8 Accounts payable 9 Common stock 10 Retained earnings 9,700 6,600 81,800 $ 32,000 18,000 3,000 40,000 11 Dividends 2,000 12 Sales 227,100 13 Sales discounts 14 Salos roturns and allowancos 15 Cost of goods sold 16 Depreciation expense-Store equipment 17 Salaries expense 1,000 5,000 75,800 63,000 18 Insurance expense 19 Rent expense 20 Store supplies expense 26,000 21 | Advertising expense 17,800 22 Totals $320,100 $320,100