Required Information Problem 5-5A (Algo) Preparing adjusting entries and income statements; computing gross margin, acid- test, and current ratios LO A1, P3, P4 [The following Information applies to the questions displayed below.] 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 Merchandise inventory Store supplies Prepaid insurance $ 25,350 13,500 5,700 2,500 Sales Store equipment Accumulated depreciation-Store equipment Accounts payable J. Nelson, Capital J. Nelson, Withdrawals Sales discounts 42,800 $ 16,500 18,000 35,000 2,050 115,650 1,800 Sales returns and allowances 2,050 Cost of goods sold 38,000 Depreciation expense-Store equipment Sales salaries expense 14,450 Office salaries expense 14,450 Insurance expense Rent expense-Selling space 6,500 6,500 0 Rent expense-Office space Store supplies expense Advertising expense Totals Additional Information: 9,500 $ 185,150 a. Store supplies still available at fiscal year-end amount to $2,200. b. Expired Insurance, an administrative expense, is $1,600 for the fiscal year. $ 185,150 c. Depreciation expense on store equipment, a selling expense, is $1,700 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. Required 1 Required 2 Required 3 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 and administrative expenses. NELSON COMPANY Sales Less: Sales discounts Income Statement For Year Ended January 31 Less: Sales returns and allowances Cost of goods sold Expenses Selling expenses Total selling expenses General and administrative expenses Total general and administrative expenses Total expenses $ 115,650 $ 1,800 2,050 3,850 111,800 38,000 73,800 0 0 0 < Required 1 Required 3 > < Prev 7 of 7 nequicu. 1. Using the above information, prepare adjusting journal entries. 2. Prepare a multiple-step income statement for the year ended January 31 that begins with gross sales and includes separat 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 January 31. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare a single-step income statement for the year ended January 31. Expenses NELSON COMPANY Income Statement For Year Ended January 31 Total expenses 0 < Required 2 Required 3 >