Nelson Company

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 general and administrative activities. Nelson Company uses a perpetual inventory system.
  
Additional Information:

1. Store supplies still available at fiscal year-end amount to $1,750.
2. Expired insurance, an administrative expense, for the fiscal year is $1,400.
3. Depreciation expense on store equipment, a selling expense, is $1,525 for the fiscal year.
4. 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. Using the above information prepare adjusting journal entries:
2. Prepare a multiple-step income statement for fiscal year 2017.
3. Prepare a single-step income statement for fiscal year 2017.

4. Compute the current ratio, acid-test ratio, and gross margin ratio as of January 31, 2017. (Round your answers to 2 decimal places.)

Current ratio = Current assets / current liabilities

Current assets                                                             Current liabilities

Cash                                         $1000                          Accounts payable                    $10000

Merchandise inventory           10900                                     Total                $10000

Store supplies                            1750

Prepaid insurance                     1000                          Current ratio: 14650/10000 à 1.465 à 1.47

                        Total                $14650

Acid-test ratio aka quick ratio = Current assets – stocks/current liabilities

Cash                            $1000              Quick ratio: 1000/10000 = 0.10

Current liabilities        10000

Gross margin ratio = (Gross profit / Net Sales) x 100

Net sales                     $107750                      Gross margin ratio: 67750/107750 = 0.63

COGS                           (40000)

Gross profit                 $67750

To View this free samples.
Please enter your valid email id.

Download Sample Now

Earn back money you have spent on downloaded sample

PAY 5 USD TO DOWNLOAD

Want to order fresh copy of the Sample Template Answers? online or do you need the old solutions for Sample Template, contact our customer support or talk to us to get the answers of it.