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

Rent expense and salaries expense are equally divided between selling activities and the general and administrative activities. Nelson 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 $ 1,750.
b. Expired insurance, an administrative expense, for the fiscal year is $ 1,400.
c. Depreciation expense on store equipment, a selling expense, is $ 1,525 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.
2. Prepare a multiple- step income statement for fiscal year 2013.
3. Prepare a single- step income statement for fiscal year 2013.
4. Compute the current ratio, acid-test ratio, and gross margin ratio as of January 31, 2013. (Round ratios to twodecimals.)

Transcribed Image Text:

NELSON COMPANY Unadjusted Trial Balance January 31, 2013 Debit 1,000 12,500 Credit Cash Merchandise inventory Store supplies Prepaid insurance Store equipment Accumulated depreciation-Store equipment Accounts payable J. Nelson, Capital J. Nelson, Withdrawals Sales Sales discounts Sales returns and allowances Cost of goods sold Depreciation expense-Store equipment Salaries expense Insurance expense Rent expense Store supplies expense Advertising expense Totals 5,800 2,400 42,900 15,250 10,000 32,000 2,200 111,950 2,200 38,400 0 35,000 15,000 0 9,800 $169,200 $169,200