The adjusting journal entry to record the net Store supplies available at fiscal year-end with Nelson Company.

Question

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Answer 1

Question

Chapter 5, Problem 5APSA

Requirement-1a:

To determine

To prepare:

The adjusting journal entry to record the net Store supplies available at fiscal year-end with Nelson Company.

Requirement-1a:

Expert Solution

Answer to Problem 5APSA

Solution:

Date	General Journal	Debit ($)	Credit ($)
Jan 31	Store supplies expense	4,050
	Store Supplies		4,050

Explanation of Solution

Store Supplies as on January 31^s^t, 2015 in unadjusted trial balance: $5,800

Store Supplies available with the company at fiscal year-end: $1,750

Therefore the net stores supplies to be recorded in stores supplies is $5,800-$1,750=$4,050

Conclusion

Hence store supplies expense is debited with $4,050 and store supplies account is credited with the same amount.

Requirement-1b:

To determine

To Prepare:

The journal entry of Nelson Company to record adjusted entry for expired insurance for the fiscal year.

Requirement-1b:

Expert Solution

Answer to Problem 5APSA

Solution:

Date	General Journal	Debit ($)	Credit ($)
Jan 31	Insurance Expense	1,400
	Prepaid insurance		1,400

Explanation of Solution

Given the expired insurance, an administrative expense for the fiscal year is $1,400.

Conclusion

Hence the insurance expense is debited with $1,400 and credited with prepaid insurance for expired insurance with $1,400.

Requirement-1c:

To determine

To Prepare:

The journal entry for Nelson Company for adjusted entry to record depreciation expense on store equipment for the fiscal year.

Requirement-1c:

Expert Solution

Answer to Problem 5APSA

Solution:

Date	General Journal	Debit ($)	Credit ($)
Jan 31	Depreciation expense (Store Equipment)	1,525
	Accumulated depreciation (Store Equipment)		1,525

Explanation of Solution

Given the depreciation expense on store equipment, a selling expense is $1,525 for the fiscal year.

Conclusion

Hence the depreciation expense for store equipment is debited with $1,525 and credited with accumulated depreciation of $1,525.

Requirement-1d:

To determine

To prepare:

The journal entry to record the adjusting entry for merchandise inventory available with Nelson Company at the fiscal year-end.

Requirement-1d:

Expert Solution

Answer to Problem 5APSA

Solution:

Date	General Journal	Debit ($)	Credit ($)
Jan 31	Cost of goods sold	1,600
	Merchandise inventory		1,600

Explanation of Solution

Merchandise inventory as on January 31^s^t, 2015: $12,500

Merchandise inventory available on fiscal year-end: $10,900

Therefore the net merchandise inventory is $12,500-$10,900=$1,600

Conclusion

Hence the cost of goods sold is debited with $1,600 and credited with merchandise inventory account for $1,600.

Requirement-2:

To determine

To Prepare:

The multi-step income statement for Nelson Company for the year ended January 31^s^t, 2015 to determine the net income of the company.

Requirement-2:

Expert Solution

Answer to Problem 5APSA

Solution:

Nelson Company Income Statement for the year ended January 31^s^t,2015
Particulars	Amount in $	Amount in $
Revenues:
Sales	111,950
Less: Sales discounts	2,000
Less: Sales returns & allowances	2,200
Net Sales		107,750
Cost of goods sold		40,000
Gross Profit		67,750
Expenses:
Selling Expenses:
Depreciation Expense	1,525
Sales salaries expense	17,500
Rent expense-Selling space	7,500
Store supplies expense	4,050
Advertising expense	9,800
Total Selling expenses	40,375
General & administrative expenses:
Insurance expense	1,400
Office salaries expense	17,500
Rent expense-Office space	7,500
Total General & administrative expenses	26,400
Total expenses		66,775
Net income		975

Explanation of Solution

Computation of total cost of goods sold:

Given,

Cost of Goods Sold as on Jan 31^s^t, 2015: $38,400

Cost of goods sold for year-end 2015: 10,900

Net cost of goods sold=$38,400-$10,900=$1,600
Therefore the total cost of goods sold is $38,400+$1,600=$40,000

Computation of Gross Profit: The formula for computing Gross profit is:

Gross Profit=Net Sales−Cost of Goods Sold

Gross Profit =$107,750−$40,000

Gross Profit=$67,750

Computation of Net Income: The formula for calculating Net income is:

Net income=Revenues−Expenses

Revenues: $67,750 (Gross Profit)

Expenses: $66,775
Therefore the net income of Nelson Company is:

$67,750−$66,775=$975

Conclusion

Hence the net income of the Nelson Company for the year ended January 31^s^t, 2015 is $975.

Requirement-3:

To determine

To prepare:

The single-step income statement of Nelson Company for the year ended January 31^s^t, 2015 to determine the net income of the company.

Requirement-3:

Expert Solution

Answer to Problem 5APSA

Solution:

Nelson Company Income Statement for the year ended January 31^s^t,2015
Particulars	Amount in $	Amount in $
Net Sales		107,750
Expenses:
Cost of goods sold	40,000
Selling Expenses	40,375
General & Administrative Expenses	26,400
Total Expenses		106,775
Net Income		975

Explanation of Solution

Computation of Net Sales: The formula for calculating Net Sales is:

Net Sales=Sales−Sales discounts−Sales returns and allowances

Net Sales =$111,950−$2,000−$2,200=$107,750

Computation of total cost of goods sold:

Given,

Cost of Goods Sold as on Jan 31^s^t, 2015: $38,400

Cost of goods sold for year-end 2015: 10,900

Net cost of goods sold=$38,400-$10,900=$1,600
Therefore the total cost of goods sold is $38,400+$1,600=$40,000
Computation of total expenses:
Total expenses=Cost of goods sold+Selling expenses+General and Administrative expenses

Total Cost of goods sold as calculated above is $40,000

Selling Expenses: Depreciation Expense ($1,525) + Sales Salaries Expense (17,500)+ Rent Expense for selling space (7,500)+Stores Supplies Expense (4,050)+Advertising Expense (9,800)=$40,375

General and Administrative Expenses: Insurance Expense (1,400) + Rent expense for office space (7,500) + Office Salaries Expense (17,500) = $26,400
Therefore total expenses using the formula is:

$40,000+$40,375+$26,400=$106,775

Computation of Net income:
Net income=Revenues−Expenses

Revenues: $107,750
Expenses: $106,775
Net income =$107,750−$106,775=$975

Conclusion

Hence the net income for Nelson Company for the year end is $975.

Requirement-4:

To determine

To Compute:

The current ratio and acid-test ratio and gross-margin ratio for Nelson Company for the year January 31^s^t, 2015.

1. Computation of Current Ratio:

Particulars Amount in $ Amount in $
Current Assets:

Cash
1,000

Merchandise inventory
10,900

Store Supplies
1,750

Prepaid Insurance
1,000

Total Current Assets

14,650

Current Liabilities:
10,000
Current Ratio:

($14,650/$10,000)
1.47

Prepaid insurance: $2,400 − $1,400 = $1,000

Merchandise inventory: $12,500 − $1600 = $10,900

Requirement-4:

Expert Solution

Explanation of Solution

The current ratio is computed by using the formula:

Current Ratio=Current Assets/Current Liabilities

2. Computation of Acid-test ratio:

Quick Assets-Cash: $1,000

Current Liabilities-Accounts Payable: $10,000

Acid-test ratio ($1,000/$10,000) = 0.10

Explanation:

The formula for Acid-test ratio is:

Acid−test ratio=Current Assets−Inventory/Current Liabilities

3. Computation of Gross Margin Ratio:

Particulars	Amount in $
Net Sales	107,750
Less: Cost of goods sold	40,000
Gross Profit/Margin	67,750
Gross Margin Ratio ($67,750/$107,750)	0.63

Explanation:

The formula for Gross Margin ratio is:

Gross Margin Ratio=Gross Margin/Net Sales

Conclusion

Hence the current ratio is 1.47, acid-test ratio is 0.10 and gross margin ratio is 0.63 for Nelson Company as on January 31^s^t, 2015.

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Answer 2

Question

Chapter 5, Problem 5APSA

Requirement-1a:

To determine

To prepare:

The adjusting journal entry to record the net Store supplies available at fiscal year-end with Nelson Company.

Requirement-1a:

Expert Solution

Answer to Problem 5APSA

Solution:

Date	General Journal	Debit ($)	Credit ($)
Jan 31	Store supplies expense	4,050
	Store Supplies		4,050

Explanation of Solution

Store Supplies as on January 31^s^t, 2015 in unadjusted trial balance: $5,800

Store Supplies available with the company at fiscal year-end: $1,750

Therefore the net stores supplies to be recorded in stores supplies is $5,800-$1,750=$4,050

Conclusion

Hence store supplies expense is debited with $4,050 and store supplies account is credited with the same amount.

Requirement-1b:

To determine

To Prepare:

The journal entry of Nelson Company to record adjusted entry for expired insurance for the fiscal year.

Requirement-1b:

Expert Solution

Answer to Problem 5APSA

Solution:

Date	General Journal	Debit ($)	Credit ($)
Jan 31	Insurance Expense	1,400
	Prepaid insurance		1,400

Explanation of Solution

Given the expired insurance, an administrative expense for the fiscal year is $1,400.

Conclusion

Hence the insurance expense is debited with $1,400 and credited with prepaid insurance for expired insurance with $1,400.

Requirement-1c:

To determine

To Prepare:

The journal entry for Nelson Company for adjusted entry to record depreciation expense on store equipment for the fiscal year.

Requirement-1c:

Expert Solution

Answer to Problem 5APSA

Solution:

Date	General Journal	Debit ($)	Credit ($)
Jan 31	Depreciation expense (Store Equipment)	1,525
	Accumulated depreciation (Store Equipment)		1,525

Explanation of Solution

Given the depreciation expense on store equipment, a selling expense is $1,525 for the fiscal year.

Conclusion

Hence the depreciation expense for store equipment is debited with $1,525 and credited with accumulated depreciation of $1,525.

Requirement-1d:

To determine

To prepare:

The journal entry to record the adjusting entry for merchandise inventory available with Nelson Company at the fiscal year-end.

Requirement-1d:

Expert Solution

Answer to Problem 5APSA

Solution:

Date	General Journal	Debit ($)	Credit ($)
Jan 31	Cost of goods sold	1,600
	Merchandise inventory		1,600

Explanation of Solution

Merchandise inventory as on January 31^s^t, 2015: $12,500

Merchandise inventory available on fiscal year-end: $10,900

Therefore the net merchandise inventory is $12,500-$10,900=$1,600

Conclusion

Hence the cost of goods sold is debited with $1,600 and credited with merchandise inventory account for $1,600.

Requirement-2:

To determine

To Prepare:

The multi-step income statement for Nelson Company for the year ended January 31^s^t, 2015 to determine the net income of the company.

Requirement-2:

Expert Solution

Answer to Problem 5APSA

Solution:

Nelson Company Income Statement for the year ended January 31^s^t,2015
Particulars	Amount in $	Amount in $
Revenues:
Sales	111,950
Less: Sales discounts	2,000
Less: Sales returns & allowances	2,200
Net Sales		107,750
Cost of goods sold		40,000
Gross Profit		67,750
Expenses:
Selling Expenses:
Depreciation Expense	1,525
Sales salaries expense	17,500
Rent expense-Selling space	7,500
Store supplies expense	4,050
Advertising expense	9,800
Total Selling expenses	40,375
General & administrative expenses:
Insurance expense	1,400
Office salaries expense	17,500
Rent expense-Office space	7,500
Total General & administrative expenses	26,400
Total expenses		66,775
Net income		975

Explanation of Solution

Computation of total cost of goods sold:

Given,

Cost of Goods Sold as on Jan 31^s^t, 2015: $38,400

Cost of goods sold for year-end 2015: 10,900

Net cost of goods sold=$38,400-$10,900=$1,600
Therefore the total cost of goods sold is $38,400+$1,600=$40,000

Computation of Gross Profit: The formula for computing Gross profit is:

Gross Profit=Net Sales−Cost of Goods Sold

Gross Profit =$107,750−$40,000

Gross Profit=$67,750

Computation of Net Income: The formula for calculating Net income is:

Net income=Revenues−Expenses

Revenues: $67,750 (Gross Profit)

Expenses: $66,775
Therefore the net income of Nelson Company is:

$67,750−$66,775=$975

Conclusion

Hence the net income of the Nelson Company for the year ended January 31^s^t, 2015 is $975.

Requirement-3:

To determine

To prepare:

The single-step income statement of Nelson Company for the year ended January 31^s^t, 2015 to determine the net income of the company.

Requirement-3:

Expert Solution

Answer to Problem 5APSA

Solution:

Nelson Company Income Statement for the year ended January 31^s^t,2015
Particulars	Amount in $	Amount in $
Net Sales		107,750
Expenses:
Cost of goods sold	40,000
Selling Expenses	40,375
General & Administrative Expenses	26,400
Total Expenses		106,775
Net Income		975

Explanation of Solution

Computation of Net Sales: The formula for calculating Net Sales is:

Net Sales=Sales−Sales discounts−Sales returns and allowances

Net Sales =$111,950−$2,000−$2,200=$107,750

Computation of total cost of goods sold:

Given,

Cost of Goods Sold as on Jan 31^s^t, 2015: $38,400

Cost of goods sold for year-end 2015: 10,900

Net cost of goods sold=$38,400-$10,900=$1,600
Therefore the total cost of goods sold is $38,400+$1,600=$40,000
Computation of total expenses:
Total expenses=Cost of goods sold+Selling expenses+General and Administrative expenses

Total Cost of goods sold as calculated above is $40,000

Selling Expenses: Depreciation Expense ($1,525) + Sales Salaries Expense (17,500)+ Rent Expense for selling space (7,500)+Stores Supplies Expense (4,050)+Advertising Expense (9,800)=$40,375

General and Administrative Expenses: Insurance Expense (1,400) + Rent expense for office space (7,500) + Office Salaries Expense (17,500) = $26,400
Therefore total expenses using the formula is:

$40,000+$40,375+$26,400=$106,775

Computation of Net income:
Net income=Revenues−Expenses

Revenues: $107,750
Expenses: $106,775
Net income =$107,750−$106,775=$975

Conclusion

Hence the net income for Nelson Company for the year end is $975.

Requirement-4:

To determine

To Compute:

The current ratio and acid-test ratio and gross-margin ratio for Nelson Company for the year January 31^s^t, 2015.

1. Computation of Current Ratio:

Particulars Amount in $ Amount in $
Current Assets:

Cash
1,000

Merchandise inventory
10,900

Store Supplies
1,750

Prepaid Insurance
1,000

Total Current Assets

14,650

Current Liabilities:
10,000
Current Ratio:

($14,650/$10,000)
1.47

Prepaid insurance: $2,400 − $1,400 = $1,000

Merchandise inventory: $12,500 − $1600 = $10,900

Requirement-4:

Expert Solution

Explanation of Solution

The current ratio is computed by using the formula:

Current Ratio=Current Assets/Current Liabilities

2. Computation of Acid-test ratio:

Quick Assets-Cash: $1,000

Current Liabilities-Accounts Payable: $10,000

Acid-test ratio ($1,000/$10,000) = 0.10

Explanation:

The formula for Acid-test ratio is:

Acid−test ratio=Current Assets−Inventory/Current Liabilities

3. Computation of Gross Margin Ratio:

Particulars	Amount in $
Net Sales	107,750
Less: Cost of goods sold	40,000
Gross Profit/Margin	67,750
Gross Margin Ratio ($67,750/$107,750)	0.63

Explanation:

The formula for Gross Margin ratio is:

Gross Margin Ratio=Gross Margin/Net Sales

Conclusion

Hence the current ratio is 1.47, acid-test ratio is 0.10 and gross margin ratio is 0.63 for Nelson Company as on January 31^s^t, 2015.

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Answer 3

Question

Chapter 5, Problem 5APSA

Requirement-1a:

To determine

To prepare:

The adjusting journal entry to record the net Store supplies available at fiscal year-end with Nelson Company.

Requirement-1a:

Expert Solution

Answer to Problem 5APSA

Solution:

Date	General Journal	Debit ($)	Credit ($)
Jan 31	Store supplies expense	4,050
	Store Supplies		4,050

Explanation of Solution

Store Supplies as on January 31^s^t, 2015 in unadjusted trial balance: $5,800

Store Supplies available with the company at fiscal year-end: $1,750

Therefore the net stores supplies to be recorded in stores supplies is $5,800-$1,750=$4,050

Conclusion

Hence store supplies expense is debited with $4,050 and store supplies account is credited with the same amount.

Requirement-1b:

To determine

To Prepare:

The journal entry of Nelson Company to record adjusted entry for expired insurance for the fiscal year.

Requirement-1b:

Expert Solution

Answer to Problem 5APSA

Solution:

Date	General Journal	Debit ($)	Credit ($)
Jan 31	Insurance Expense	1,400
	Prepaid insurance		1,400

Explanation of Solution

Given the expired insurance, an administrative expense for the fiscal year is $1,400.

Conclusion

Hence the insurance expense is debited with $1,400 and credited with prepaid insurance for expired insurance with $1,400.

Requirement-1c:

To determine

To Prepare:

The journal entry for Nelson Company for adjusted entry to record depreciation expense on store equipment for the fiscal year.

Requirement-1c:

Expert Solution

Answer to Problem 5APSA

Solution:

Date	General Journal	Debit ($)	Credit ($)
Jan 31	Depreciation expense (Store Equipment)	1,525
	Accumulated depreciation (Store Equipment)		1,525

Explanation of Solution

Given the depreciation expense on store equipment, a selling expense is $1,525 for the fiscal year.

Conclusion

Hence the depreciation expense for store equipment is debited with $1,525 and credited with accumulated depreciation of $1,525.

Requirement-1d:

To determine

To prepare:

The journal entry to record the adjusting entry for merchandise inventory available with Nelson Company at the fiscal year-end.

Requirement-1d:

Expert Solution

Answer to Problem 5APSA

Solution:

Date	General Journal	Debit ($)	Credit ($)
Jan 31	Cost of goods sold	1,600
	Merchandise inventory		1,600

Explanation of Solution

Merchandise inventory as on January 31^s^t, 2015: $12,500

Merchandise inventory available on fiscal year-end: $10,900

Therefore the net merchandise inventory is $12,500-$10,900=$1,600

Conclusion

Hence the cost of goods sold is debited with $1,600 and credited with merchandise inventory account for $1,600.

Requirement-2:

To determine

To Prepare:

The multi-step income statement for Nelson Company for the year ended January 31^s^t, 2015 to determine the net income of the company.

Requirement-2:

Expert Solution

Answer to Problem 5APSA

Solution:

Nelson Company Income Statement for the year ended January 31^s^t,2015
Particulars	Amount in $	Amount in $
Revenues:
Sales	111,950
Less: Sales discounts	2,000
Less: Sales returns & allowances	2,200
Net Sales		107,750
Cost of goods sold		40,000
Gross Profit		67,750
Expenses:
Selling Expenses:
Depreciation Expense	1,525
Sales salaries expense	17,500
Rent expense-Selling space	7,500
Store supplies expense	4,050
Advertising expense	9,800
Total Selling expenses	40,375
General & administrative expenses:
Insurance expense	1,400
Office salaries expense	17,500
Rent expense-Office space	7,500
Total General & administrative expenses	26,400
Total expenses		66,775
Net income		975

Explanation of Solution

Computation of total cost of goods sold:

Given,

Cost of Goods Sold as on Jan 31^s^t, 2015: $38,400

Cost of goods sold for year-end 2015: 10,900

Net cost of goods sold=$38,400-$10,900=$1,600
Therefore the total cost of goods sold is $38,400+$1,600=$40,000

Computation of Gross Profit: The formula for computing Gross profit is:

Gross Profit=Net Sales−Cost of Goods Sold

Gross Profit =$107,750−$40,000

Gross Profit=$67,750

Computation of Net Income: The formula for calculating Net income is:

Net income=Revenues−Expenses

Revenues: $67,750 (Gross Profit)

Expenses: $66,775
Therefore the net income of Nelson Company is:

$67,750−$66,775=$975

Conclusion

Hence the net income of the Nelson Company for the year ended January 31^s^t, 2015 is $975.

Requirement-3:

To determine

To prepare:

The single-step income statement of Nelson Company for the year ended January 31^s^t, 2015 to determine the net income of the company.

Requirement-3:

Expert Solution

Answer to Problem 5APSA

Solution:

Nelson Company Income Statement for the year ended January 31^s^t,2015
Particulars	Amount in $	Amount in $
Net Sales		107,750
Expenses:
Cost of goods sold	40,000
Selling Expenses	40,375
General & Administrative Expenses	26,400
Total Expenses		106,775
Net Income		975

Explanation of Solution

Computation of Net Sales: The formula for calculating Net Sales is:

Net Sales=Sales−Sales discounts−Sales returns and allowances

Net Sales =$111,950−$2,000−$2,200=$107,750

Computation of total cost of goods sold:

Given,

Cost of Goods Sold as on Jan 31^s^t, 2015: $38,400

Cost of goods sold for year-end 2015: 10,900

Net cost of goods sold=$38,400-$10,900=$1,600
Therefore the total cost of goods sold is $38,400+$1,600=$40,000
Computation of total expenses:
Total expenses=Cost of goods sold+Selling expenses+General and Administrative expenses

Total Cost of goods sold as calculated above is $40,000

Selling Expenses: Depreciation Expense ($1,525) + Sales Salaries Expense (17,500)+ Rent Expense for selling space (7,500)+Stores Supplies Expense (4,050)+Advertising Expense (9,800)=$40,375

General and Administrative Expenses: Insurance Expense (1,400) + Rent expense for office space (7,500) + Office Salaries Expense (17,500) = $26,400
Therefore total expenses using the formula is:

$40,000+$40,375+$26,400=$106,775

Computation of Net income:
Net income=Revenues−Expenses

Revenues: $107,750
Expenses: $106,775
Net income =$107,750−$106,775=$975

Conclusion

Hence the net income for Nelson Company for the year end is $975.

Requirement-4:

To determine

To Compute:

The current ratio and acid-test ratio and gross-margin ratio for Nelson Company for the year January 31^s^t, 2015.

1. Computation of Current Ratio:

Particulars Amount in $ Amount in $
Current Assets:

Cash
1,000

Merchandise inventory
10,900

Store Supplies
1,750

Prepaid Insurance
1,000

Total Current Assets

14,650

Current Liabilities:
10,000
Current Ratio:

($14,650/$10,000)
1.47

Prepaid insurance: $2,400 − $1,400 = $1,000

Merchandise inventory: $12,500 − $1600 = $10,900

Requirement-4:

Expert Solution

Explanation of Solution

The current ratio is computed by using the formula:

Current Ratio=Current Assets/Current Liabilities

2. Computation of Acid-test ratio:

Quick Assets-Cash: $1,000

Current Liabilities-Accounts Payable: $10,000

Acid-test ratio ($1,000/$10,000) = 0.10

Explanation:

The formula for Acid-test ratio is:

Acid−test ratio=Current Assets−Inventory/Current Liabilities

3. Computation of Gross Margin Ratio:

Particulars	Amount in $
Net Sales	107,750
Less: Cost of goods sold	40,000
Gross Profit/Margin	67,750
Gross Margin Ratio ($67,750/$107,750)	0.63

Explanation:

The formula for Gross Margin ratio is:

Gross Margin Ratio=Gross Margin/Net Sales

Conclusion

Hence the current ratio is 1.47, acid-test ratio is 0.10 and gross margin ratio is 0.63 for Nelson Company as on January 31^s^t, 2015.

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Answer 4

Question

Chapter 5, Problem 5APSA

Requirement-1a:

To determine

To prepare:

The adjusting journal entry to record the net Store supplies available at fiscal year-end with Nelson Company.

Requirement-1a:

Expert Solution

Answer to Problem 5APSA

Solution:

Date	General Journal	Debit ($)	Credit ($)
Jan 31	Store supplies expense	4,050
	Store Supplies		4,050

Explanation of Solution

Store Supplies as on January 31^s^t, 2015 in unadjusted trial balance: $5,800

Store Supplies available with the company at fiscal year-end: $1,750

Therefore the net stores supplies to be recorded in stores supplies is $5,800-$1,750=$4,050

Conclusion

Hence store supplies expense is debited with $4,050 and store supplies account is credited with the same amount.

Requirement-1b:

To determine

To Prepare:

The journal entry of Nelson Company to record adjusted entry for expired insurance for the fiscal year.

Requirement-1b:

Expert Solution

Answer to Problem 5APSA

Solution:

Date	General Journal	Debit ($)	Credit ($)
Jan 31	Insurance Expense	1,400
	Prepaid insurance		1,400

Explanation of Solution

Given the expired insurance, an administrative expense for the fiscal year is $1,400.

Conclusion

Hence the insurance expense is debited with $1,400 and credited with prepaid insurance for expired insurance with $1,400.

Requirement-1c:

To determine

To Prepare:

The journal entry for Nelson Company for adjusted entry to record depreciation expense on store equipment for the fiscal year.

Requirement-1c:

Expert Solution

Answer to Problem 5APSA

Solution:

Date	General Journal	Debit ($)	Credit ($)
Jan 31	Depreciation expense (Store Equipment)	1,525
	Accumulated depreciation (Store Equipment)		1,525

Explanation of Solution

Given the depreciation expense on store equipment, a selling expense is $1,525 for the fiscal year.

Conclusion

Hence the depreciation expense for store equipment is debited with $1,525 and credited with accumulated depreciation of $1,525.

Requirement-1d:

To determine

To prepare:

The journal entry to record the adjusting entry for merchandise inventory available with Nelson Company at the fiscal year-end.

Requirement-1d:

Expert Solution

Answer to Problem 5APSA

Solution:

Date	General Journal	Debit ($)	Credit ($)
Jan 31	Cost of goods sold	1,600
	Merchandise inventory		1,600

Explanation of Solution

Merchandise inventory as on January 31^s^t, 2015: $12,500

Merchandise inventory available on fiscal year-end: $10,900

Therefore the net merchandise inventory is $12,500-$10,900=$1,600

Conclusion

Hence the cost of goods sold is debited with $1,600 and credited with merchandise inventory account for $1,600.

Requirement-2:

To determine

To Prepare:

The multi-step income statement for Nelson Company for the year ended January 31^s^t, 2015 to determine the net income of the company.

Requirement-2:

Expert Solution

Answer to Problem 5APSA

Solution:

Nelson Company Income Statement for the year ended January 31^s^t,2015
Particulars	Amount in $	Amount in $
Revenues:
Sales	111,950
Less: Sales discounts	2,000
Less: Sales returns & allowances	2,200
Net Sales		107,750
Cost of goods sold		40,000
Gross Profit		67,750
Expenses:
Selling Expenses:
Depreciation Expense	1,525
Sales salaries expense	17,500
Rent expense-Selling space	7,500
Store supplies expense	4,050
Advertising expense	9,800
Total Selling expenses	40,375
General & administrative expenses:
Insurance expense	1,400
Office salaries expense	17,500
Rent expense-Office space	7,500
Total General & administrative expenses	26,400
Total expenses		66,775
Net income		975

Explanation of Solution

Computation of total cost of goods sold:

Given,

Cost of Goods Sold as on Jan 31^s^t, 2015: $38,400

Cost of goods sold for year-end 2015: 10,900

Net cost of goods sold=$38,400-$10,900=$1,600
Therefore the total cost of goods sold is $38,400+$1,600=$40,000

Computation of Gross Profit: The formula for computing Gross profit is:

Gross Profit=Net Sales−Cost of Goods Sold

Gross Profit =$107,750−$40,000

Gross Profit=$67,750

Computation of Net Income: The formula for calculating Net income is:

Net income=Revenues−Expenses

Revenues: $67,750 (Gross Profit)

Expenses: $66,775
Therefore the net income of Nelson Company is:

$67,750−$66,775=$975

Conclusion

Hence the net income of the Nelson Company for the year ended January 31^s^t, 2015 is $975.

Requirement-3:

To determine

To prepare:

The single-step income statement of Nelson Company for the year ended January 31^s^t, 2015 to determine the net income of the company.

Requirement-3:

Expert Solution

Answer to Problem 5APSA

Solution:

Nelson Company Income Statement for the year ended January 31^s^t,2015
Particulars	Amount in $	Amount in $
Net Sales		107,750
Expenses:
Cost of goods sold	40,000
Selling Expenses	40,375
General & Administrative Expenses	26,400
Total Expenses		106,775
Net Income		975

Explanation of Solution

Computation of Net Sales: The formula for calculating Net Sales is:

Net Sales=Sales−Sales discounts−Sales returns and allowances

Net Sales =$111,950−$2,000−$2,200=$107,750

Computation of total cost of goods sold:

Given,

Cost of Goods Sold as on Jan 31^s^t, 2015: $38,400

Cost of goods sold for year-end 2015: 10,900

Net cost of goods sold=$38,400-$10,900=$1,600
Therefore the total cost of goods sold is $38,400+$1,600=$40,000
Computation of total expenses:
Total expenses=Cost of goods sold+Selling expenses+General and Administrative expenses

Total Cost of goods sold as calculated above is $40,000

Selling Expenses: Depreciation Expense ($1,525) + Sales Salaries Expense (17,500)+ Rent Expense for selling space (7,500)+Stores Supplies Expense (4,050)+Advertising Expense (9,800)=$40,375

General and Administrative Expenses: Insurance Expense (1,400) + Rent expense for office space (7,500) + Office Salaries Expense (17,500) = $26,400
Therefore total expenses using the formula is:

$40,000+$40,375+$26,400=$106,775

Computation of Net income:
Net income=Revenues−Expenses

Revenues: $107,750
Expenses: $106,775
Net income =$107,750−$106,775=$975

Conclusion

Hence the net income for Nelson Company for the year end is $975.

Requirement-4:

To determine

To Compute:

The current ratio and acid-test ratio and gross-margin ratio for Nelson Company for the year January 31^s^t, 2015.

1. Computation of Current Ratio:

Particulars Amount in $ Amount in $
Current Assets:

Cash
1,000

Merchandise inventory
10,900

Store Supplies
1,750

Prepaid Insurance
1,000

Total Current Assets

14,650

Current Liabilities:
10,000
Current Ratio:

($14,650/$10,000)
1.47

Prepaid insurance: $2,400 − $1,400 = $1,000

Merchandise inventory: $12,500 − $1600 = $10,900

Requirement-4:

Expert Solution

Explanation of Solution

The current ratio is computed by using the formula:

Current Ratio=Current Assets/Current Liabilities

2. Computation of Acid-test ratio:

Quick Assets-Cash: $1,000

Current Liabilities-Accounts Payable: $10,000

Acid-test ratio ($1,000/$10,000) = 0.10

Explanation:

The formula for Acid-test ratio is:

Acid−test ratio=Current Assets−Inventory/Current Liabilities

3. Computation of Gross Margin Ratio:

Particulars	Amount in $
Net Sales	107,750
Less: Cost of goods sold	40,000
Gross Profit/Margin	67,750
Gross Margin Ratio ($67,750/$107,750)	0.63

Explanation:

The formula for Gross Margin ratio is:

Gross Margin Ratio=Gross Margin/Net Sales

Conclusion

Hence the current ratio is 1.47, acid-test ratio is 0.10 and gross margin ratio is 0.63 for Nelson Company as on January 31^s^t, 2015.

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Answer 5

Chapter 5, Problem 5APSA

Requirement-1a:

To determine

To prepare:

The adjusting journal entry to record the net Store supplies available at fiscal year-end with Nelson Company.

Requirement-1a:

Expert Solution

Answer to Problem 5APSA

Solution:

Date	General Journal	Debit ($)	Credit ($)
Jan 31	Store supplies expense	4,050
	Store Supplies		4,050

Explanation of Solution

Store Supplies as on January 31^s^t, 2015 in unadjusted trial balance: $5,800

Store Supplies available with the company at fiscal year-end: $1,750

Therefore the net stores supplies to be recorded in stores supplies is $5,800-$1,750=$4,050

Conclusion

Hence store supplies expense is debited with $4,050 and store supplies account is credited with the same amount.

Requirement-1b:

To determine

To Prepare:

The journal entry of Nelson Company to record adjusted entry for expired insurance for the fiscal year.

Requirement-1b:

Expert Solution

Answer to Problem 5APSA

Solution:

Date	General Journal	Debit ($)	Credit ($)
Jan 31	Insurance Expense	1,400
	Prepaid insurance		1,400

Explanation of Solution

Given the expired insurance, an administrative expense for the fiscal year is $1,400.

Conclusion

Hence the insurance expense is debited with $1,400 and credited with prepaid insurance for expired insurance with $1,400.

Requirement-1c:

To determine

To Prepare:

The journal entry for Nelson Company for adjusted entry to record depreciation expense on store equipment for the fiscal year.

Requirement-1c:

Expert Solution

Answer to Problem 5APSA

Solution:

Date	General Journal	Debit ($)	Credit ($)
Jan 31	Depreciation expense (Store Equipment)	1,525
	Accumulated depreciation (Store Equipment)		1,525

Explanation of Solution

Given the depreciation expense on store equipment, a selling expense is $1,525 for the fiscal year.

Conclusion

Hence the depreciation expense for store equipment is debited with $1,525 and credited with accumulated depreciation of $1,525.

Requirement-1d:

To determine

To prepare:

The journal entry to record the adjusting entry for merchandise inventory available with Nelson Company at the fiscal year-end.

Requirement-1d:

Expert Solution

Answer to Problem 5APSA

Solution:

Date	General Journal	Debit ($)	Credit ($)
Jan 31	Cost of goods sold	1,600
	Merchandise inventory		1,600

Explanation of Solution

Merchandise inventory as on January 31^s^t, 2015: $12,500

Merchandise inventory available on fiscal year-end: $10,900

Therefore the net merchandise inventory is $12,500-$10,900=$1,600

Conclusion

Hence the cost of goods sold is debited with $1,600 and credited with merchandise inventory account for $1,600.

Requirement-2:

To determine

To Prepare:

The multi-step income statement for Nelson Company for the year ended January 31^s^t, 2015 to determine the net income of the company.

Requirement-2:

Expert Solution

Answer to Problem 5APSA

Solution:

Nelson Company Income Statement for the year ended January 31^s^t,2015
Particulars	Amount in $	Amount in $
Revenues:
Sales	111,950
Less: Sales discounts	2,000
Less: Sales returns & allowances	2,200
Net Sales		107,750
Cost of goods sold		40,000
Gross Profit		67,750
Expenses:
Selling Expenses:
Depreciation Expense	1,525
Sales salaries expense	17,500
Rent expense-Selling space	7,500
Store supplies expense	4,050
Advertising expense	9,800
Total Selling expenses	40,375
General & administrative expenses:
Insurance expense	1,400
Office salaries expense	17,500
Rent expense-Office space	7,500
Total General & administrative expenses	26,400
Total expenses		66,775
Net income		975

Explanation of Solution

Computation of total cost of goods sold:

Given,

Cost of Goods Sold as on Jan 31^s^t, 2015: $38,400

Cost of goods sold for year-end 2015: 10,900

Net cost of goods sold=$38,400-$10,900=$1,600
Therefore the total cost of goods sold is $38,400+$1,600=$40,000

Computation of Gross Profit: The formula for computing Gross profit is:

Gross Profit=Net Sales−Cost of Goods Sold

Gross Profit =$107,750−$40,000

Gross Profit=$67,750

Computation of Net Income: The formula for calculating Net income is:

Net income=Revenues−Expenses

Revenues: $67,750 (Gross Profit)

Expenses: $66,775
Therefore the net income of Nelson Company is:

$67,750−$66,775=$975

Conclusion

Hence the net income of the Nelson Company for the year ended January 31^s^t, 2015 is $975.

Requirement-3:

To determine

To prepare:

The single-step income statement of Nelson Company for the year ended January 31^s^t, 2015 to determine the net income of the company.

Requirement-3:

Expert Solution

Answer to Problem 5APSA

Solution:

Nelson Company Income Statement for the year ended January 31^s^t,2015
Particulars	Amount in $	Amount in $
Net Sales		107,750
Expenses:
Cost of goods sold	40,000
Selling Expenses	40,375
General & Administrative Expenses	26,400
Total Expenses		106,775
Net Income		975

Explanation of Solution

Computation of Net Sales: The formula for calculating Net Sales is:

Net Sales=Sales−Sales discounts−Sales returns and allowances

Net Sales =$111,950−$2,000−$2,200=$107,750

Computation of total cost of goods sold:

Given,

Cost of Goods Sold as on Jan 31^s^t, 2015: $38,400

Cost of goods sold for year-end 2015: 10,900

Net cost of goods sold=$38,400-$10,900=$1,600
Therefore the total cost of goods sold is $38,400+$1,600=$40,000
Computation of total expenses:
Total expenses=Cost of goods sold+Selling expenses+General and Administrative expenses

Total Cost of goods sold as calculated above is $40,000

Selling Expenses: Depreciation Expense ($1,525) + Sales Salaries Expense (17,500)+ Rent Expense for selling space (7,500)+Stores Supplies Expense (4,050)+Advertising Expense (9,800)=$40,375

General and Administrative Expenses: Insurance Expense (1,400) + Rent expense for office space (7,500) + Office Salaries Expense (17,500) = $26,400
Therefore total expenses using the formula is:

$40,000+$40,375+$26,400=$106,775

Computation of Net income:
Net income=Revenues−Expenses

Revenues: $107,750
Expenses: $106,775
Net income =$107,750−$106,775=$975

Conclusion

Hence the net income for Nelson Company for the year end is $975.

Requirement-4:

To determine

To Compute:

The current ratio and acid-test ratio and gross-margin ratio for Nelson Company for the year January 31^s^t, 2015.

1. Computation of Current Ratio:

Particulars Amount in $ Amount in $
Current Assets:

Cash
1,000

Merchandise inventory
10,900

Store Supplies
1,750

Prepaid Insurance
1,000

Total Current Assets

14,650

Current Liabilities:
10,000
Current Ratio:

($14,650/$10,000)
1.47

Prepaid insurance: $2,400 − $1,400 = $1,000

Merchandise inventory: $12,500 − $1600 = $10,900

Requirement-4:

Expert Solution

Explanation of Solution

The current ratio is computed by using the formula:

Current Ratio=Current Assets/Current Liabilities

2. Computation of Acid-test ratio:

Quick Assets-Cash: $1,000

Current Liabilities-Accounts Payable: $10,000

Acid-test ratio ($1,000/$10,000) = 0.10

Explanation:

The formula for Acid-test ratio is:

Acid−test ratio=Current Assets−Inventory/Current Liabilities

3. Computation of Gross Margin Ratio:

Particulars	Amount in $
Net Sales	107,750
Less: Cost of goods sold	40,000
Gross Profit/Margin	67,750
Gross Margin Ratio ($67,750/$107,750)	0.63

Explanation:

The formula for Gross Margin ratio is:

Gross Margin Ratio=Gross Margin/Net Sales

Conclusion

Hence the current ratio is 1.47, acid-test ratio is 0.10 and gross margin ratio is 0.63 for Nelson Company as on January 31^s^t, 2015.

Answer 6

Chapter 5, Problem 5APSA

Requirement-1a:

To determine

To prepare:

The adjusting journal entry to record the net Store supplies available at fiscal year-end with Nelson Company.

Requirement-1a:

Expert Solution

Answer to Problem 5APSA

Solution:

Date	General Journal	Debit ($)	Credit ($)
Jan 31	Store supplies expense	4,050
	Store Supplies		4,050

Explanation of Solution

Store Supplies as on January 31^s^t, 2015 in unadjusted trial balance: $5,800

Store Supplies available with the company at fiscal year-end: $1,750

Therefore the net stores supplies to be recorded in stores supplies is $5,800-$1,750=$4,050

Conclusion

Hence store supplies expense is debited with $4,050 and store supplies account is credited with the same amount.

Answer 7

Chapter 5, Problem 5APSA

Requirement-1a:

To determine

To prepare:

The adjusting journal entry to record the net Store supplies available at fiscal year-end with Nelson Company.

Answer 8

Requirement-1a:

Expert Solution

Answer to Problem 5APSA

Solution:

Date	General Journal	Debit ($)	Credit ($)
Jan 31	Store supplies expense	4,050
	Store Supplies		4,050

Answer 9

Requirement-1a:

Expert Solution

Answer 10

Requirement-1a:

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Store Supplies as on January 31^s^t, 2015 in unadjusted trial balance: $5,800

Store Supplies available with the company at fiscal year-end: $1,750

Therefore the net stores supplies to be recorded in stores supplies is $5,800-$1,750=$4,050

Answer 13

Conclusion

Hence store supplies expense is debited with $4,050 and store supplies account is credited with the same amount.

Answer 14

Requirement-1b:

To determine

To Prepare:

The journal entry of Nelson Company to record adjusted entry for expired insurance for the fiscal year.

Requirement-1b:

Expert Solution

Answer to Problem 5APSA

Solution:

Date	General Journal	Debit ($)	Credit ($)
Jan 31	Insurance Expense	1,400
	Prepaid insurance		1,400

Explanation of Solution

Given the expired insurance, an administrative expense for the fiscal year is $1,400.

Conclusion

Hence the insurance expense is debited with $1,400 and credited with prepaid insurance for expired insurance with $1,400.

Answer 15

Requirement-1b:

To determine

To Prepare:

The journal entry of Nelson Company to record adjusted entry for expired insurance for the fiscal year.

Answer 16

Requirement-1b:

Expert Solution

Answer to Problem 5APSA

Solution:

Date	General Journal	Debit ($)	Credit ($)
Jan 31	Insurance Expense	1,400
	Prepaid insurance		1,400

Answer 17

Requirement-1b:

Expert Solution

Answer 18

Requirement-1b:

Expert Solution

Answer 19

Expert Solution

Answer 20

Explanation of Solution

Given the expired insurance, an administrative expense for the fiscal year is $1,400.

Answer 21

Conclusion

Hence the insurance expense is debited with $1,400 and credited with prepaid insurance for expired insurance with $1,400.

Answer 22

Requirement-1c:

To determine

To Prepare:

The journal entry for Nelson Company for adjusted entry to record depreciation expense on store equipment for the fiscal year.

Requirement-1c:

Expert Solution

Answer to Problem 5APSA

Solution:

Date	General Journal	Debit ($)	Credit ($)
Jan 31	Depreciation expense (Store Equipment)	1,525
	Accumulated depreciation (Store Equipment)		1,525

Explanation of Solution

Given the depreciation expense on store equipment, a selling expense is $1,525 for the fiscal year.

Conclusion

Hence the depreciation expense for store equipment is debited with $1,525 and credited with accumulated depreciation of $1,525.

Answer 23

Requirement-1c:

To determine

To Prepare:

The journal entry for Nelson Company for adjusted entry to record depreciation expense on store equipment for the fiscal year.

Answer 24

Requirement-1c:

Expert Solution

Answer to Problem 5APSA

Solution:

Date	General Journal	Debit ($)	Credit ($)
Jan 31	Depreciation expense (Store Equipment)	1,525
	Accumulated depreciation (Store Equipment)		1,525

Answer 25

Requirement-1c:

Expert Solution

Answer 26

Requirement-1c:

Expert Solution

Answer 27

Expert Solution

Answer 28

Explanation of Solution

Given the depreciation expense on store equipment, a selling expense is $1,525 for the fiscal year.

Answer 29

Conclusion

Hence the depreciation expense for store equipment is debited with $1,525 and credited with accumulated depreciation of $1,525.

Answer 30

Requirement-1d:

To determine

To prepare:

The journal entry to record the adjusting entry for merchandise inventory available with Nelson Company at the fiscal year-end.

Requirement-1d:

Expert Solution

Answer to Problem 5APSA

Solution:

Date	General Journal	Debit ($)	Credit ($)
Jan 31	Cost of goods sold	1,600
	Merchandise inventory		1,600

Explanation of Solution

Merchandise inventory as on January 31^s^t, 2015: $12,500

Merchandise inventory available on fiscal year-end: $10,900

Therefore the net merchandise inventory is $12,500-$10,900=$1,600

Conclusion

Hence the cost of goods sold is debited with $1,600 and credited with merchandise inventory account for $1,600.

Answer 31

Requirement-1d:

To determine

To prepare:

The journal entry to record the adjusting entry for merchandise inventory available with Nelson Company at the fiscal year-end.

Answer 32

Requirement-1d:

Expert Solution

Answer to Problem 5APSA

Solution:

Date	General Journal	Debit ($)	Credit ($)
Jan 31	Cost of goods sold	1,600
	Merchandise inventory		1,600

Answer 33

Requirement-1d:

Expert Solution

Answer 34

Requirement-1d:

Expert Solution

Answer 35

Expert Solution

Answer 36

Explanation of Solution

Merchandise inventory as on January 31^s^t, 2015: $12,500

Merchandise inventory available on fiscal year-end: $10,900

Therefore the net merchandise inventory is $12,500-$10,900=$1,600

Answer 37

Conclusion

Hence the cost of goods sold is debited with $1,600 and credited with merchandise inventory account for $1,600.

Answer 38

Requirement-2:

To determine

To Prepare:

The multi-step income statement for Nelson Company for the year ended January 31^s^t, 2015 to determine the net income of the company.

Requirement-2:

Expert Solution

Answer to Problem 5APSA

Solution:

Nelson Company Income Statement for the year ended January 31^s^t,2015
Particulars	Amount in $	Amount in $
Revenues:
Sales	111,950
Less: Sales discounts	2,000
Less: Sales returns & allowances	2,200
Net Sales		107,750
Cost of goods sold		40,000
Gross Profit		67,750
Expenses:
Selling Expenses:
Depreciation Expense	1,525
Sales salaries expense	17,500
Rent expense-Selling space	7,500
Store supplies expense	4,050
Advertising expense	9,800
Total Selling expenses	40,375
General & administrative expenses:
Insurance expense	1,400
Office salaries expense	17,500
Rent expense-Office space	7,500
Total General & administrative expenses	26,400
Total expenses		66,775
Net income		975

Explanation of Solution

Computation of total cost of goods sold:

Given,

Cost of Goods Sold as on Jan 31^s^t, 2015: $38,400

Cost of goods sold for year-end 2015: 10,900

Net cost of goods sold=$38,400-$10,900=$1,600
Therefore the total cost of goods sold is $38,400+$1,600=$40,000

Computation of Gross Profit: The formula for computing Gross profit is:

Gross Profit=Net Sales−Cost of Goods Sold

Gross Profit =$107,750−$40,000

Gross Profit=$67,750

Computation of Net Income: The formula for calculating Net income is:

Net income=Revenues−Expenses

Revenues: $67,750 (Gross Profit)

Expenses: $66,775
Therefore the net income of Nelson Company is:

$67,750−$66,775=$975

Conclusion

Hence the net income of the Nelson Company for the year ended January 31^s^t, 2015 is $975.

Answer 39

Requirement-2:

To determine

To Prepare:

The multi-step income statement for Nelson Company for the year ended January 31^s^t, 2015 to determine the net income of the company.

Answer 40

Requirement-2:

Expert Solution

Answer to Problem 5APSA

Solution:

Nelson Company Income Statement for the year ended January 31^s^t,2015
Particulars	Amount in $	Amount in $
Revenues:
Sales	111,950
Less: Sales discounts	2,000
Less: Sales returns & allowances	2,200
Net Sales		107,750
Cost of goods sold		40,000
Gross Profit		67,750
Expenses:
Selling Expenses:
Depreciation Expense	1,525
Sales salaries expense	17,500
Rent expense-Selling space	7,500
Store supplies expense	4,050
Advertising expense	9,800
Total Selling expenses	40,375
General & administrative expenses:
Insurance expense	1,400
Office salaries expense	17,500
Rent expense-Office space	7,500
Total General & administrative expenses	26,400
Total expenses		66,775
Net income		975

Answer 41

Requirement-2:

Expert Solution

Answer 42

Requirement-2:

Expert Solution

Answer 43

Expert Solution

Answer 44

Explanation of Solution

Computation of total cost of goods sold:

Given,

Cost of Goods Sold as on Jan 31^s^t, 2015: $38,400

Cost of goods sold for year-end 2015: 10,900

Net cost of goods sold=$38,400-$10,900=$1,600
Therefore the total cost of goods sold is $38,400+$1,600=$40,000

Computation of Gross Profit: The formula for computing Gross profit is:

Gross Profit=Net Sales−Cost of Goods Sold

Gross Profit =$107,750−$40,000

Gross Profit=$67,750

Computation of Net Income: The formula for calculating Net income is:

Net income=Revenues−Expenses

Revenues: $67,750 (Gross Profit)

Expenses: $66,775
Therefore the net income of Nelson Company is:

$67,750−$66,775=$975

Answer 45

Conclusion

Hence the net income of the Nelson Company for the year ended January 31^s^t, 2015 is $975.

Answer 46

Requirement-3:

To determine

To prepare:

The single-step income statement of Nelson Company for the year ended January 31^s^t, 2015 to determine the net income of the company.

Requirement-3:

Expert Solution

Answer to Problem 5APSA

Solution:

Nelson Company Income Statement for the year ended January 31^s^t,2015
Particulars	Amount in $	Amount in $
Net Sales		107,750
Expenses:
Cost of goods sold	40,000
Selling Expenses	40,375
General & Administrative Expenses	26,400
Total Expenses		106,775
Net Income		975

Explanation of Solution

Computation of Net Sales: The formula for calculating Net Sales is:

Net Sales=Sales−Sales discounts−Sales returns and allowances

Net Sales =$111,950−$2,000−$2,200=$107,750

Computation of total cost of goods sold:

Given,

Cost of Goods Sold as on Jan 31^s^t, 2015: $38,400

Cost of goods sold for year-end 2015: 10,900

Net cost of goods sold=$38,400-$10,900=$1,600
Therefore the total cost of goods sold is $38,400+$1,600=$40,000
Computation of total expenses:
Total expenses=Cost of goods sold+Selling expenses+General and Administrative expenses

Total Cost of goods sold as calculated above is $40,000

Selling Expenses: Depreciation Expense ($1,525) + Sales Salaries Expense (17,500)+ Rent Expense for selling space (7,500)+Stores Supplies Expense (4,050)+Advertising Expense (9,800)=$40,375

General and Administrative Expenses: Insurance Expense (1,400) + Rent expense for office space (7,500) + Office Salaries Expense (17,500) = $26,400
Therefore total expenses using the formula is:

$40,000+$40,375+$26,400=$106,775

Computation of Net income:
Net income=Revenues−Expenses

Revenues: $107,750
Expenses: $106,775
Net income =$107,750−$106,775=$975

Conclusion

Hence the net income for Nelson Company for the year end is $975.

Answer 47

Requirement-3:

To determine

To prepare:

The single-step income statement of Nelson Company for the year ended January 31^s^t, 2015 to determine the net income of the company.

Answer 48

Requirement-3:

Expert Solution

Answer to Problem 5APSA

Solution:

Nelson Company Income Statement for the year ended January 31^s^t,2015
Particulars	Amount in $	Amount in $
Net Sales		107,750
Expenses:
Cost of goods sold	40,000
Selling Expenses	40,375
General & Administrative Expenses	26,400
Total Expenses		106,775
Net Income		975

Answer 49

Requirement-3:

Expert Solution

Answer 50

Requirement-3:

Expert Solution

Answer 51

Expert Solution

Answer 52

Explanation of Solution

Computation of Net Sales: The formula for calculating Net Sales is:

Net Sales=Sales−Sales discounts−Sales returns and allowances

Net Sales =$111,950−$2,000−$2,200=$107,750

Computation of total cost of goods sold:

Given,

Cost of Goods Sold as on Jan 31^s^t, 2015: $38,400

Cost of goods sold for year-end 2015: 10,900

Net cost of goods sold=$38,400-$10,900=$1,600
Therefore the total cost of goods sold is $38,400+$1,600=$40,000
Computation of total expenses:
Total expenses=Cost of goods sold+Selling expenses+General and Administrative expenses

Total Cost of goods sold as calculated above is $40,000

Selling Expenses: Depreciation Expense ($1,525) + Sales Salaries Expense (17,500)+ Rent Expense for selling space (7,500)+Stores Supplies Expense (4,050)+Advertising Expense (9,800)=$40,375

General and Administrative Expenses: Insurance Expense (1,400) + Rent expense for office space (7,500) + Office Salaries Expense (17,500) = $26,400
Therefore total expenses using the formula is:

$40,000+$40,375+$26,400=$106,775

Computation of Net income:
Net income=Revenues−Expenses

Revenues: $107,750
Expenses: $106,775
Net income =$107,750−$106,775=$975

Answer 53

Conclusion

Hence the net income for Nelson Company for the year end is $975.

Answer 54

Requirement-4:

To determine

To Compute:

The current ratio and acid-test ratio and gross-margin ratio for Nelson Company for the year January 31^s^t, 2015.

1. Computation of Current Ratio:

Particulars Amount in $ Amount in $
Current Assets:

Cash
1,000

Merchandise inventory
10,900

Store Supplies
1,750

Prepaid Insurance
1,000

Total Current Assets

14,650

Current Liabilities:
10,000
Current Ratio:

($14,650/$10,000)
1.47

Prepaid insurance: $2,400 − $1,400 = $1,000

Merchandise inventory: $12,500 − $1600 = $10,900

Requirement-4:

Expert Solution

Explanation of Solution

The current ratio is computed by using the formula:

Current Ratio=Current Assets/Current Liabilities

2. Computation of Acid-test ratio:

Quick Assets-Cash: $1,000

Current Liabilities-Accounts Payable: $10,000

Acid-test ratio ($1,000/$10,000) = 0.10

Explanation:

The formula for Acid-test ratio is:

Acid−test ratio=Current Assets−Inventory/Current Liabilities

3. Computation of Gross Margin Ratio:

Particulars	Amount in $
Net Sales	107,750
Less: Cost of goods sold	40,000
Gross Profit/Margin	67,750
Gross Margin Ratio ($67,750/$107,750)	0.63

Explanation:

The formula for Gross Margin ratio is:

Gross Margin Ratio=Gross Margin/Net Sales

Conclusion

Hence the current ratio is 1.47, acid-test ratio is 0.10 and gross margin ratio is 0.63 for Nelson Company as on January 31^s^t, 2015.

Answer 55

Requirement-4:

To determine

To Compute:

The current ratio and acid-test ratio and gross-margin ratio for Nelson Company for the year January 31^s^t, 2015.

1. Computation of Current Ratio:

Particulars Amount in $ Amount in $
Current Assets:

Cash
1,000

Merchandise inventory
10,900

Store Supplies
1,750

Prepaid Insurance
1,000

Total Current Assets

14,650

Current Liabilities:
10,000
Current Ratio:

($14,650/$10,000)
1.47

Prepaid insurance: $2,400 − $1,400 = $1,000

Merchandise inventory: $12,500 − $1600 = $10,900

Answer 56

Requirement-4:

Expert Solution

Explanation of Solution

The current ratio is computed by using the formula:

Current Ratio=Current Assets/Current Liabilities

2. Computation of Acid-test ratio:

Quick Assets-Cash: $1,000

Current Liabilities-Accounts Payable: $10,000

Acid-test ratio ($1,000/$10,000) = 0.10

Explanation:

The formula for Acid-test ratio is:

Acid−test ratio=Current Assets−Inventory/Current Liabilities

3. Computation of Gross Margin Ratio:

Particulars	Amount in $
Net Sales	107,750
Less: Cost of goods sold	40,000
Gross Profit/Margin	67,750
Gross Margin Ratio ($67,750/$107,750)	0.63

Explanation:

The formula for Gross Margin ratio is:

Gross Margin Ratio=Gross Margin/Net Sales

Answer 57

Requirement-4:

Expert Solution

Answer 58

Requirement-4:

Expert Solution

Answer 59

Expert Solution

Answer 60

Conclusion

Hence the current ratio is 1.47, acid-test ratio is 0.10 and gross margin ratio is 0.63 for Nelson Company as on January 31^s^t, 2015.

Answer 61

Ch. 5 - Prob. 1DQ Ch. 5 - 2. In comparing the accounts of a merchandising...Ch. 5 - Prob. 3DQ Ch. 5 - Prob. 4DQ Ch. 5 - Prob. 5DQ Ch. 5 - Prob. 6DQ Ch. 5 - Prob. 7DQ Ch. 5 - Prob. 8DQ Ch. 5 - Prob. 9DQ Ch. 5 - Prob. 10DQ

The adjusting journal entry to record the net Store supplies available at fiscal year-end with Nelson Company.

Videos

To prepare:

The adjusting journal entry to record the net Store supplies available at fiscal year-end with Nelson Company.

Answer to Problem 5APSA

Explanation of Solution

To Prepare:

The journal entry of Nelson Company to record adjusted entry for expired insurance for the fiscal year.

Answer to Problem 5APSA

Explanation of Solution

To Prepare:

The journal entry for Nelson Company for adjusted entry to record depreciation expense on store equipment for the fiscal year.

Answer to Problem 5APSA

Explanation of Solution

To prepare:

The journal entry to record the adjusting entry for merchandise inventory available with Nelson Company at the fiscal year-end.

Answer to Problem 5APSA

Explanation of Solution

To Prepare:

The multi-step income statement for Nelson Company for the year ended January 31^s^t, 2015 to determine the net income of the company.

Answer to Problem 5APSA

Explanation of Solution

To prepare:

The single-step income statement of Nelson Company for the year ended January 31^s^t, 2015 to determine the net income of the company.

Answer to Problem 5APSA

Explanation of Solution

Explanation of Solution

Want to see more full solutions like this?

Chapter 5 Solutions

The adjusting journal entry to record the net Store supplies available at fiscal year-end with Nelson Company.

Videos

To prepare: The adjusting journal entry to record the net Store supplies available at fiscal year-end with Nelson Company.

Answer to Problem 5APSA

Explanation of Solution

To Prepare: The journal entry of Nelson Company to record adjusted entry for expired insurance for the fiscal year.

Answer to Problem 5APSA

Explanation of Solution

To Prepare: The journal entry for Nelson Company for adjusted entry to record depreciation expense on store equipment for the fiscal year.

Answer to Problem 5APSA

Explanation of Solution

To prepare: The journal entry to record the adjusting entry for merchandise inventory available with Nelson Company at the fiscal year-end.

Answer to Problem 5APSA

Explanation of Solution

To Prepare: The multi-step income statement for Nelson Company for the year ended January 31st, 2015 to determine the net income of the company.

Answer to Problem 5APSA

Explanation of Solution

To prepare: The single-step income statement of Nelson Company for the year ended January 31st, 2015 to determine the net income of the company.

Answer to Problem 5APSA

Explanation of Solution

Explanation of Solution

Want to see more full solutions like this?

Chapter 5 Solutions

To prepare:

The adjusting journal entry to record the net Store supplies available at fiscal year-end with Nelson Company.

To Prepare:

The journal entry of Nelson Company to record adjusted entry for expired insurance for the fiscal year.

To Prepare:

The journal entry for Nelson Company for adjusted entry to record depreciation expense on store equipment for the fiscal year.

To prepare:

The journal entry to record the adjusting entry for merchandise inventory available with Nelson Company at the fiscal year-end.

To Prepare:

The multi-step income statement for Nelson Company for the year ended January 31^s^t, 2015 to determine the net income of the company.

To prepare:

The single-step income statement of Nelson Company for the year ended January 31^s^t, 2015 to determine the net income of the company.