Exercise $2-1$

For this exercise, use the following fiscal year$-$end unadjusted trial balance for the Bigelow Company.

Note: Rent and salary expenses are divided equally between general$/$administrative and selling activities. Bigelow uses a perpetual inventory system.

BIGELOW COMPANY

Unadjusted Trial Balance

April $30,2012($Fiscal year$-$end$)$

Debit Credit

Cash $$2,150$

Merchandise inventory $12,100$

Store supplies $4,600$

Prepaid insurance $2,100$

Store equipment $42,350$

Accumulated depreciation$$Store equipment $$12,000$

Accounts payable $8,700$

Common stock $4,500$

Retained earnings $25,400$

Dividends $1,800$

Sales $108,500$

Sales discounts $950$

Sales returns and allowances $1,750$

Cost of goods sold $36,300$

Depreciation expense$$Store equipment $0$

Salaries expense $32,500$

Insurance expense $0$

Rent expense $13,800$

Store supplies expense $0$

Advertising expense $8,700\_\_\_\_\_\_\_$

Totals $$159,100$ $$159,100$

$1.$ Prepare adjusting journal entries for the following:

a$.$ $$1,700$ of store supplies remaining at the end of the fiscal year.

b$.$ $$1,800$ of expired insurance for the fiscal year $($administrative expense$).$

c$.$ $$1,250$ depreciation expense on store equipment for the fiscal year $($selling expense$).$

d$.$ $$11,200$ of merchandise inventory remaining at the end of the fiscal year $($based on a physical count to estimate shrinkage$).$

Adjustment $($a$)$:

Adjustment $($b$)$:

Adjustment $($c$)$:

Adjustment $($d$)$:

$2.$ Prepare a fiscal year $2012$ multiple$-$step income statement. For distinguished performance, prepare both multiple$-$ and single$-$step income statements.

BIGELOW COMPANY

Income Statement

For Year Ended April $30,2011$

$[$Create the $2011$ multiple$-$step income statement here.$]$

Prepare a fiscal year $2012$ single$-$step income statement.

BIGELOW COMPANY

Income Statement

For Year Ended April $30,2011$

$[$Create the $2011$ single$-$step income statement here.$]$

$3.$ Compute the following ratios as of April $30,2012.$

a$.$ Current ratio.

b$.$ Acid test ratio.

$[$Compute the ratios here.$]$

$4.$ For distinguished performance, compute the gross margin ratio.

$[$Compute the ratio here.$]$