
Concept explainers
Requirement-1a:
To prepare:
The adjusting
Requirement-1b:
To Prepare:
The journal entry of Foster Products Company to record
Requirement-1c:
To Prepare:
The journal entry for Foster Products Company for adjusted entry to record
Requirement-1d:
To prepare:
The journal entry to record the adjusting entry for merchandise inventory available with Foster Products Company at the fiscal year-end.
Requirement-2:
To Prepare:
The multi-step income statement for Foster Products Company for the year ended October 31st, 2015 to determine the net income of the company.
Foster Products Income Statement for the year ended October 31st,2015 | ||||
Particulars | Amount in $ | Amount in $ | ||
Revenues: | ||||
Sales | 227,100 | |||
Less: Sales discounts | 1,000 | |||
Less: Sales returns & allowances | 5,000 | |||
Net Sales | 221,100 | |||
Cost of goods sold | 78,500 | |||
Gross Profit | 142,600 | |||
Expenses: | ||||
Selling Expenses: | ||||
Depreciation Expense | 3,000 | |||
Sales salaries expense | 31,500 | |||
Rent expense-Selling space | 13,000 | |||
Store supplies expense | 6,000 | |||
Advertising expense | 17,800 | |||
Total Selling expenses | 71,300 | |||
General & administrative expenses: | ||||
Insurance expense | 2,800 | |||
Office salaries expense | 31,500 | |||
Rent expense-Office space | 13,000 | |||
Total General & administrative expenses | 47,300 | |||
Total expenses | 118,600 | |||
Net income | 24,000 |
Requirement-3:
To prepare:
The single-step income statement of Foster Products Company for the year ended October 31st, 2015 to determine the net income of the company.
Foster Products Company Income Statement for the year ended October 31st,2015 | ||||
Particulars | Amount in $ | Amount in $ | ||
Net Sales | 221,100 | |||
Expenses: | ||||
Cost of goods sold | 78,500 | |||
Selling Expenses | 71,300 | |||
General & Administrative Expenses | 47,300 | |||
Total Expenses | 197,100 | |||
Net Income | 24,000 |
Requirement-4:
To Compute:
The
1. Computation of Current Ratio:
Particulars | Amount in $ | Amount in $ |
Current Assets: | ||
Cash | 7,400 | |
Merchandise inventory | 21,300 | |
Store Supplies | 3,700 | |
Prepaid Insurance | 3,800 | |
Total Current Assets | 36,200 | |
Current Liabilities: | 18,000 | |
Current Ratio: | ||
($35,200/$18,000) | 2.01 |
Prepaid insurance: $6,600 − $2,800 = $3,800
Merchandise inventory: $24,000 − $2,700 = $21,300

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Chapter 5 Solutions
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