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Question #9

Required information

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The following unadjusted trial balance is prepared at fiscal year-end for Nelson Company.

NELSON COMPANY
Unadjusted Trial Balance
January 31, 2017
Debit Credit
Cash $ 8,150
Merchandise inventory 14,500
Store supplies 5,500
Prepaid insurance 2,600
Store equipment 42,800
Accumulated depreciation—Store equipment $ 17,850
Accounts payable 16,000
J. Nelson, Capital 18,000
J. Nelson, Withdrawals 2,100
Sales 114,550
Sales discounts 1,850
Sales returns and allowances 2,000
Cost of goods sold 38,000
Depreciation expense—Store equipment 0
Salaries expense 27,200
Insurance expense 0
Rent expense 12,000
Store supplies expense 0
Advertising expense 9,700
Totals $ 166,400 $ 166,400
Rent expense and salaries expense are equally divided between selling activities and general and administrative activities. Nelson Company uses a perpetual inventory system.

Additional Information:

Store supplies still available at fiscal year-end amount to $2,500.

Expired insurance, an administrative expense, for the fiscal year is $1,550.

Depreciation expense on store equipment, a selling expense, is $1,575 for the fiscal year.

To estimate shrinkage, a physical count of ending merchandise inventory is taken. It shows $10,200 of inventory is still available at fiscal year-end.

Required:

1. Using the above information prepare adjusting journal entries:
2. Prepare a multiple-step income statement for fiscal year 2017.
3. Prepare a single-step income statement for fiscal year 2017.

4. Compute the current ratio, acid-test ratio, and gross margin ratio as of January 31, 2017. (Round your answers to 2 decimal places.)