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MAVERICK [17]
3 years ago
9

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

Business
1 answer:
Lunna [17]3 years ago
6 0

Answer:

1)

a. Store supplies still available at fiscal year-end amount to $1,750.

Dr Supplies expense 4,050

    Cr Supplies 4,050

b. Expired insurance, an administrative expense, for the fiscal year is $1,400.

Dr Insurance expense 1,400

    Cr Prepaid insurance 1,400

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

Dr Depreciation expense on store equipment 1,525

    Cr Accumulated depreciation: store equipment 1,525

d. To estimate shrinkage, a physical count of ending merchandise inventory is taken. It shows $10,900 of inventory is still available at fiscal year-end.

Dr Cost of goods sold 1,600

    Cr merchandise inventory 1,600

2) Income statement

Sales                                                             $111,950

  • Sales discounts                                    $2,000
  • Sales returns and allowances             <u>$2,200</u>

Net sales                                                    $107,750

- Cost of goods sold                                  <u>$40,000</u>

Gross profit                                                 $67,750

  • Operating expenses:
  • Depreciation expense $1,525
  • Salaries expense $35,000
  • Insurance expense $1,400
  • Rent expense $15,000
  • Store supplies expense $4,050
  • Advertising expense $9,800            <u>$66,775</u>

Operating income                                           $975

3) Statement of owner's equity (the company doesn't have retained earnings)

J. Nelson, Capital, at January 1, 202x                 $32,000

Net income 202x                                                       <u>$975</u>

Subtotal                                                                 $32,975

- Withdrawals                                                          <u>$2,200</u>

J. Nelson, Capital, at December 31, 202x           $30,775

Balance sheet

Assets:

Cash $1,000

Merchandise Inventory $10,900

Store supplies $1,750

Prepaid Insurance $1,000

Store equipment, net $26,125

Total assets $40,775

Liabilities + owner's equity:

Accounts payable $10,000

J. Nelson, Capital $30,775

Total liabilities + owner's equity $40,775

4) current ratio = $14,650 / $10,000 = 1.465

acid test ratio = $3,750 / $10,000 = 0.375

gross margin ratio = $67,750 / $107,750 = 0.629

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