Chapter 5, Problem 3GLP

To determine

Concept Introduction:

Adjusting Entries:

An adjusting entry is a journal entry which intends to record the expenses and revenue occurred during the accounting period.

Requirement 1:

1. Preparation of adjusting entries as January 31.

To determine

Concept Introduction:

Multiple Income Statement:

The income statement which classifies the items of revenues and expenses during an accounting period into different categories like gross profit, operating and non-operating revenues and expenses is called a multiple income statement.

Requirement 2:

To prepare:

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

To determine

Concept Introduction:

Single step Income statement:

It is one of the two generally used income statements. In this type the Net Income is found by only one subtraction.

Requirement 3:

To prepare:

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

To determine

Concept Introduction:

Current ratio:

A ratio that measures the company's ability to pay off short and long term obligations are known as current ratio.

Acid test ratio:

A ratio that measures the company's ability to cover current liabilities using the short term assets is known as acid test ratio.

Gross margin ratio:

A profitability ratio that measures how company sells its inventory is known as gross margin ratio.

Requirement 4:

To Compute:

Computation of current ratio, acid-test ratio and gross margin ratio