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

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, is $2,800 for the fiscal year.
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 the year ended October 31 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 the year ended October 31.
4. Compute the current ratio, acid-test ratio, and gross margin ratio as of October 31. (Round ratios to two decimals.)

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FOSTER PRODUCTS COMPANY Unadjusted Trial Balance October 31 Cash Merchandise inventory Store supplies Prepaid Insurance Store equipment Accumulated depreciation-Store equipment Accounts payable D. Foster, Capital D. Foster, 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 Debit Credit $ 7,400 24,000 9,700 6,600 81,800 2,000 1,000 5,000 75,800 0 31,500 31,500 0 13,000 13,000 0 $32,000 18,000 43,000 227,100 17,800 $320,100 $320,100