Chapter 5, Problem 3GLP

Based on Problem 5-5A

Problem 5-5A
Preparing adjusting entries and income statements; and computing gross margin, acid-test, and current ratios A1 A2 P3 P4

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:
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 S10.900 of inventory is still available at fiscal year-end.
2. Prepare a multiple-step income statement for fiscal year 2015.
3. Prepare a single-step income statement for fiscal year 2015.
4. Compute the current ratio, acid-test ratio, and gross margin ratio as of January 31, 2015. (Round ratios to two decimals.)