Required information

Skip to question

$[$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 $ $1,000$

Merchandise inventory $12,500$

Store supplies $5,800$

Prepaid insurance $2,400$

Store equipment $42,900$

Accumulated depreciation$$Store equipment $ $15,250$

Accounts payable $10,000$

Common stock $5,000$

Retained earnings $27,000$

Dividends $2,200$

Sales $111,950$

Sales discounts $2,000$

Sales returns and allowances $2,200$

Cost of goods sold $38,400$

Depreciation expense$$Store equipment $0$

Sales salaries expense $17,500$

Office salaries expense $17,500$

Insurance expense $0$

Rent expense$$Selling space $7,500$

Rent expense$$Office space $7,500$

Store supplies expense $0$

Advertising expense $9,800$

Totals $ $169,200$ $ $169,200$

Additional Information:

Store supplies still available at fiscal year$-$end amount to $$1,750.$

Expired insurance, an administrative expense, is $$1,400$ for the fiscal year.

Depreciation expense on store equipment, a selling expense, is $$1,525$ for the fiscal year.

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:

Using the above information, prepare adjusting journal entries.

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.

Prepare a single$-$step income statement for the year ended January $31.$