Chapter 5, Problem 5BPSB

Requirement-1a:

To determine

To prepare:

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

Requirement-1b:

To determine

To Prepare:

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

Requirement-1c:

To determine

To Prepare:

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

Requirement-1d:

To determine

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 determine

To Prepare:

The multi-step income statement for Foster Products Company for the year ended October 31^st, 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 determine

To prepare:

The single-step income statement of Foster Products Company for the year ended October 31^st, 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 determine

To Compute:

The current ratio and acid-test ratio and gross-margin ratio for Foster Products Company for the year October 31^st, 2015.

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