Adjusting Entries : The accounting entries which are passed at the expiry of an accounting year to change the closing balances of various general ledger accounts are adjusting entries. These are made to align the reported results and financial position of the business in accordance with the accounting framework, such as GAAP or IFRS. Rules of Journal Entry : To increase the balance of account one needs to debit assets, expenses, losses and credit all the liabilities, revenues and gains including capital. To decrease the balance of account credit all assets, expenses, losses and debit all liabilities, revenues and gains including capital. Perpetual Inventory System: It is a inventory system wherein the accounts related to inventory are updated on each purchase and sale happening. Quantities of inventory are updated on continuous basis. This can be done by integrating the inventory system to order entry and to the retail sale point of system. Gross Margin Ratio: It means the ratio of gross profit earned to net sales. It represents the percentage of total revenue which company retains after deducting the direct costs linked with the goods produced. Formula to compute gross margin ratio is, Gross margin ratio = Gross margin Net sales Current Ratio : It is ratio which gives idea about the company’s ability to pay it liabilities. Formula to compute current ratio is, Current ratio = Current assets Current liabilities Acid Test Ratio: It measures the ability of company to use cash or its liquid assets or pay off current liabilities. Formula to compute acid test ratio is, Acid test ratio = Current assets − ( Stock + Prepaid expenses ) Current liabilities 1. To Prepare: Adjusting entries.

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Answer 1

Question

Chapter 4, Problem 5PSA

To determine

Adjusting Entries:

The accounting entries which are passed at the expiry of an accounting year to change the closing balances of various general ledger accounts are adjusting entries. These are made to align the reported results and financial position of the business in accordance with the accounting framework, such as GAAP or IFRS.

Rules of Journal Entry:

To increase the balance of account one needs to debit assets, expenses, losses and credit all the liabilities, revenues and gains including capital.

To decrease the balance of account credit all assets, expenses, losses and debit all liabilities, revenues and gains including capital.

Perpetual Inventory System:

It is a inventory system wherein the accounts related to inventory are updated on each purchase and sale happening. Quantities of inventory are updated on continuous basis. This can be done by integrating the inventory system to order entry and to the retail sale point of system.

Gross Margin Ratio:

It means the ratio of gross profit earned to net sales. It represents the percentage of total revenue which company retains after deducting the direct costs linked with the goods produced. Formula to compute gross margin ratio is,

Gross margin ratio=Gross marginNet sales

Current Ratio:

It is ratio which gives idea about the company’s ability to pay it liabilities. Formula to compute current ratio is,

Current ratio=Current assetsCurrent liabilities

Acid Test Ratio:

It measures the ability of company to use cash or its liquid assets or pay off current liabilities. Formula to compute acid test ratio is,

Acid test ratio=Current assets−(Stock+Prepaid expenses)Current liabilities

1.

To Prepare: Adjusting entries.

2.

To determine

To Prepare: Multi step income statement.

3.

To determine

To prepare: Single step income statement.

4.

To determine

To compute: Current and acid test ratio and gross margin ratio.

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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 COMPANYUnadjusted Trial BalanceJanuary 31 Debit Credit Cash $ 26,650 Merchandise inventory 12,500 Store supplies 5,100 Prepaid insurance 2,500 Store equipment 42,700 Accumulated depreciation—Store equipment $ 19,250 Accounts payable 16,000 Common stock 5,000 Retained earnings 32,000 Dividends 2,150 Sales 116,250 Sales discounts 2,000 Sales returns and allowances 2,100 Cost of goods sold 38,000 Depreciation expense—Store equipment 0…

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. 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 the year ended January 31 that begins with gross sales and…

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. Cash NELSON COMPANY Unadjusted Trial Balance January 31 Debit Credit $ 22,400 13,500 Merchandise inventory Store supplies 6,000 Prepaid insurance Store equipment 2,400 42,800 Accumulated depreciation-Store equipment $ 16,750 Accounts payable 14,000 Common stock 5,000 Retained earnings 29,000 Dividends 2,200 Sales 115,450 Sales discounts 1,950 Sales returns and allowances 2,150 Cost of goods sold 38,000 Depreciation expense-Store equipment 0 Sales salaries expense 12,900 Office salaries expense 12,900 Insurance expense 0 Rent expense-Selling space 6,500 Rent expense-Office space 6,500…

Answer 2

Question

Chapter 4, Problem 5PSA

To determine

Adjusting Entries:

The accounting entries which are passed at the expiry of an accounting year to change the closing balances of various general ledger accounts are adjusting entries. These are made to align the reported results and financial position of the business in accordance with the accounting framework, such as GAAP or IFRS.

Rules of Journal Entry:

To increase the balance of account one needs to debit assets, expenses, losses and credit all the liabilities, revenues and gains including capital.

To decrease the balance of account credit all assets, expenses, losses and debit all liabilities, revenues and gains including capital.

Perpetual Inventory System:

It is a inventory system wherein the accounts related to inventory are updated on each purchase and sale happening. Quantities of inventory are updated on continuous basis. This can be done by integrating the inventory system to order entry and to the retail sale point of system.

Gross Margin Ratio:

It means the ratio of gross profit earned to net sales. It represents the percentage of total revenue which company retains after deducting the direct costs linked with the goods produced. Formula to compute gross margin ratio is,

Gross margin ratio=Gross marginNet sales

Current Ratio:

It is ratio which gives idea about the company’s ability to pay it liabilities. Formula to compute current ratio is,

Current ratio=Current assetsCurrent liabilities

Acid Test Ratio:

It measures the ability of company to use cash or its liquid assets or pay off current liabilities. Formula to compute acid test ratio is,

Acid test ratio=Current assets−(Stock+Prepaid expenses)Current liabilities

1.

To Prepare: Adjusting entries.

2.

To determine

To Prepare: Multi step income statement.

3.

To determine

To prepare: Single step income statement.

4.

To determine

To compute: Current and acid test ratio and gross margin ratio.

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Answer 3

Question

Chapter 4, Problem 5PSA

To determine

Adjusting Entries:

The accounting entries which are passed at the expiry of an accounting year to change the closing balances of various general ledger accounts are adjusting entries. These are made to align the reported results and financial position of the business in accordance with the accounting framework, such as GAAP or IFRS.

Rules of Journal Entry:

To increase the balance of account one needs to debit assets, expenses, losses and credit all the liabilities, revenues and gains including capital.

To decrease the balance of account credit all assets, expenses, losses and debit all liabilities, revenues and gains including capital.

Perpetual Inventory System:

It is a inventory system wherein the accounts related to inventory are updated on each purchase and sale happening. Quantities of inventory are updated on continuous basis. This can be done by integrating the inventory system to order entry and to the retail sale point of system.

Gross Margin Ratio:

It means the ratio of gross profit earned to net sales. It represents the percentage of total revenue which company retains after deducting the direct costs linked with the goods produced. Formula to compute gross margin ratio is,

Gross margin ratio=Gross marginNet sales

Current Ratio:

It is ratio which gives idea about the company’s ability to pay it liabilities. Formula to compute current ratio is,

Current ratio=Current assetsCurrent liabilities

Acid Test Ratio:

It measures the ability of company to use cash or its liquid assets or pay off current liabilities. Formula to compute acid test ratio is,

Acid test ratio=Current assets−(Stock+Prepaid expenses)Current liabilities

1.

To Prepare: Adjusting entries.

2.

To determine

To Prepare: Multi step income statement.

3.

To determine

To prepare: Single step income statement.

4.

To determine

To compute: Current and acid test ratio and gross margin ratio.

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Answer 4

Question

Chapter 4, Problem 5PSA

To determine

Adjusting Entries:

The accounting entries which are passed at the expiry of an accounting year to change the closing balances of various general ledger accounts are adjusting entries. These are made to align the reported results and financial position of the business in accordance with the accounting framework, such as GAAP or IFRS.

Rules of Journal Entry:

To increase the balance of account one needs to debit assets, expenses, losses and credit all the liabilities, revenues and gains including capital.

To decrease the balance of account credit all assets, expenses, losses and debit all liabilities, revenues and gains including capital.

Perpetual Inventory System:

It is a inventory system wherein the accounts related to inventory are updated on each purchase and sale happening. Quantities of inventory are updated on continuous basis. This can be done by integrating the inventory system to order entry and to the retail sale point of system.

Gross Margin Ratio:

It means the ratio of gross profit earned to net sales. It represents the percentage of total revenue which company retains after deducting the direct costs linked with the goods produced. Formula to compute gross margin ratio is,

Gross margin ratio=Gross marginNet sales

Current Ratio:

It is ratio which gives idea about the company’s ability to pay it liabilities. Formula to compute current ratio is,

Current ratio=Current assetsCurrent liabilities

Acid Test Ratio:

It measures the ability of company to use cash or its liquid assets or pay off current liabilities. Formula to compute acid test ratio is,

Acid test ratio=Current assets−(Stock+Prepaid expenses)Current liabilities

1.

To Prepare: Adjusting entries.

2.

To determine

To Prepare: Multi step income statement.

3.

To determine

To prepare: Single step income statement.

4.

To determine

To compute: Current and acid test ratio and gross margin ratio.

Expert Solution & Answer

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Answer 5

Chapter 4, Problem 5PSA

To determine

Adjusting Entries:

The accounting entries which are passed at the expiry of an accounting year to change the closing balances of various general ledger accounts are adjusting entries. These are made to align the reported results and financial position of the business in accordance with the accounting framework, such as GAAP or IFRS.

Rules of Journal Entry:

To increase the balance of account one needs to debit assets, expenses, losses and credit all the liabilities, revenues and gains including capital.

To decrease the balance of account credit all assets, expenses, losses and debit all liabilities, revenues and gains including capital.

Perpetual Inventory System:

It is a inventory system wherein the accounts related to inventory are updated on each purchase and sale happening. Quantities of inventory are updated on continuous basis. This can be done by integrating the inventory system to order entry and to the retail sale point of system.

Gross Margin Ratio:

It means the ratio of gross profit earned to net sales. It represents the percentage of total revenue which company retains after deducting the direct costs linked with the goods produced. Formula to compute gross margin ratio is,

Gross margin ratio=Gross marginNet sales

Current Ratio:

It is ratio which gives idea about the company’s ability to pay it liabilities. Formula to compute current ratio is,

Current ratio=Current assetsCurrent liabilities

Acid Test Ratio:

It measures the ability of company to use cash or its liquid assets or pay off current liabilities. Formula to compute acid test ratio is,

Acid test ratio=Current assets−(Stock+Prepaid expenses)Current liabilities

1.

To Prepare: Adjusting entries.

2.

To determine

To Prepare: Multi step income statement.

3.

To determine

To prepare: Single step income statement.

4.

To determine

To compute: Current and acid test ratio and gross margin ratio.

Answer 6

Chapter 4, Problem 5PSA

To determine

Adjusting Entries:

The accounting entries which are passed at the expiry of an accounting year to change the closing balances of various general ledger accounts are adjusting entries. These are made to align the reported results and financial position of the business in accordance with the accounting framework, such as GAAP or IFRS.

Rules of Journal Entry:

To increase the balance of account one needs to debit assets, expenses, losses and credit all the liabilities, revenues and gains including capital.

To decrease the balance of account credit all assets, expenses, losses and debit all liabilities, revenues and gains including capital.

Perpetual Inventory System:

It is a inventory system wherein the accounts related to inventory are updated on each purchase and sale happening. Quantities of inventory are updated on continuous basis. This can be done by integrating the inventory system to order entry and to the retail sale point of system.

Gross Margin Ratio:

It means the ratio of gross profit earned to net sales. It represents the percentage of total revenue which company retains after deducting the direct costs linked with the goods produced. Formula to compute gross margin ratio is,

Gross margin ratio=Gross marginNet sales

Current Ratio:

It is ratio which gives idea about the company’s ability to pay it liabilities. Formula to compute current ratio is,

Current ratio=Current assetsCurrent liabilities

Acid Test Ratio:

It measures the ability of company to use cash or its liquid assets or pay off current liabilities. Formula to compute acid test ratio is,

Acid test ratio=Current assets−(Stock+Prepaid expenses)Current liabilities

1.

To Prepare: Adjusting entries.

Answer 7

Chapter 4, Problem 5PSA

To determine

Adjusting Entries:

The accounting entries which are passed at the expiry of an accounting year to change the closing balances of various general ledger accounts are adjusting entries. These are made to align the reported results and financial position of the business in accordance with the accounting framework, such as GAAP or IFRS.

Rules of Journal Entry:

To increase the balance of account one needs to debit assets, expenses, losses and credit all the liabilities, revenues and gains including capital.

To decrease the balance of account credit all assets, expenses, losses and debit all liabilities, revenues and gains including capital.

Perpetual Inventory System:

It is a inventory system wherein the accounts related to inventory are updated on each purchase and sale happening. Quantities of inventory are updated on continuous basis. This can be done by integrating the inventory system to order entry and to the retail sale point of system.

Gross Margin Ratio:

It means the ratio of gross profit earned to net sales. It represents the percentage of total revenue which company retains after deducting the direct costs linked with the goods produced. Formula to compute gross margin ratio is,

Gross margin ratio=Gross marginNet sales

Current Ratio:

It is ratio which gives idea about the company’s ability to pay it liabilities. Formula to compute current ratio is,

Current ratio=Current assetsCurrent liabilities

Acid Test Ratio:

It measures the ability of company to use cash or its liquid assets or pay off current liabilities. Formula to compute acid test ratio is,

Acid test ratio=Current assets−(Stock+Prepaid expenses)Current liabilities

1.

To Prepare: Adjusting entries.

Answer 8

2.

To determine

To Prepare: Multi step income statement.

Answer 9

2.

To determine

To Prepare: Multi step income statement.

Answer 10

3.

To determine

To prepare: Single step income statement.

Answer 11

3.

To determine

To prepare: Single step income statement.

Answer 12

4.

To determine

To compute: Current and acid test ratio and gross margin ratio.

Answer 13

4.

To determine

To compute: Current and acid test ratio and gross margin ratio.

Answer 14

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Answer 15

Expert Solution & Answer

Answer 16

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Answer 17

Ch. 4 - Prob. 1MCQ Ch. 4 - A company purchased $4,500 of merchandise on May 1...Ch. 4 - Prob. 3MCQ Ch. 4 - Prob. 4MCQ Ch. 4 - Prob. 5MCQ Ch. 4 - Prob. 1DQ Ch. 4 - Prob. 2DQ Ch. 4 - Prob. 3DQ Ch. 4 - Prob. 4DQ Ch. 4 - Prob. 5DQ

Solution Summary: The author explains how accounting entries are passed at the expiration of an accounting year to change the closing balances of various general ledger accounts.

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To Prepare: Multi step income statement.

To prepare: Single step income statement.

To compute: Current and acid test ratio and gross margin ratio.

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