Question

Rent expense and salaries expense are equally divided between selling activities and the general and administrative activities. Nelson company uses a perpetual inventory system. Additional information:
a. Store supplies still available at fiscal year-end amount to $1,750.

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

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

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.

Answer 1

Answer: The journal entry for Nelson company are as follows uses a perpetual inventory system:

Info  General Journal   Debit  Credit

     

a Store Supplies expense    $1,750  

 To Store Supplies    $1,750  

     

b Insurance Expense    $1,400  

 To Prepaid Insurance    $1,400  

     

c Depreciation expense    $1,525  

   To Accumulated Depreciation - Store equipment  $1,525  

     

d Cost of goods sold    $10,900  

 To Merchandize Inventory    $10,900  

Answer 2

Answer:

please find the answers below

Explanation:

Perpetual Inventory system:

The perpetual inventory system is a method of inventory management that involves tracking inventory after every, or almost every major purchase. This inventory management method is the direct opposite of the periodical inventory management system, where a company maintains its inventory through physical counts on a definite schedule and recurring basis.

Companies use the perpetual inventory system when they have more than one location where inventory is stored, or when a company carries expensive goods such as electronics or jewelry that needs to be tracked all the time.

Closing journal entries are entries made at the end of an accounting period to zero out all the temporary accounts and transfers their balances to permanent accounts.  

The purpose of the closing journal entries is to reset the temporary account balances to zero on the general ledger, the record-keeping system for a company’s financial data. The purpose of is to reconcile the company’s accounts.  

The following are general journal entries that Nelson needs to record, when using the perpetual inventory system.

Account                       Dr       Cr

Stores supplies expenses   $1, 750    

Stores supplies          $1, 750

Stores supplies that are available at year end

Insurance expense    $1, 400

Prepaid expenses               $1, 400

Insurance expense for the year

Depreciation expense     $1, 525

Accumulated depreciation – store equipment  $1, 525

Recording the depreciation expense for the year

Cost of goods sold    $10, 900

Merchandise inventory       $10, 900

Inventory still available at year end

These journal entries are recorded at the recorded at year end in order to close off all income and expense accounts.