Question
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
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 ExpenseStore Equipment, Sales Salaries Expense, Rent ExpenseSelling 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 | $ 21,850 | |
Merchandise inventory | 13,500 | |
Store supplies | 5,600 | |
Prepaid insurance | 2,700 | |
Store equipment | 42,900 | |
Accumulated depreciationStore equipment | $ 19,000 | |
Accounts payable | 14,000 | |
Common stock | 3,000 | |
Retained earnings | 31,000 | |
Dividends | 2,000 | |
Sales | 114,650 | |
Sales discounts | 1,850 | |
Sales returns and allowances | 2,150 | |
Cost of goods sold | 38,000 | |
Depreciation expenseStore equipment | 0 | |
Sales salaries expense | 13,050 | |
Office salaries expense | 13,050 | |
Insurance expense | 0 | |
Rent expenseSelling space | 7,500 | |
Rent expenseOffice space | 7,500 | |
Store supplies expense | 0 | |
Advertising expense | 10,000 | |
Totals | $ 181,650 | $ 181,650 |
Additional Information:
- Store supplies still available at fiscal year-end amount to $1,900.
- Expired insurance, an administrative expense, is $1,450 for the fiscal year.
- Depreciation expense on store equipment, a selling expense, is $1,600 for the fiscal year.
- To estimate shrinkage, a physical count of ending merchandise inventory is taken. It shows $10,500 of inventory is still available at fiscal year-end.
Required: 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 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 January 31.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started