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

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 $1,850.
b. Expired insurance, an administrative expense, for the fiscal year is $1,800.
c. Depreciation expense on store equipment, a selling expense, is $1,650 for the fiscal year.
d. To estimate shrinkage, a physical count of ending merchandise inventory is taken. It shows $11,000 of inventory is still available at fiscal year-end.
References
Section Break Problem 5-5A Preparing adjusting entries and income statements; and computing gross margin, acid-test, and current ratios LO A1, A2, P3, P4
Problem 5-5A Part 1
Required:
1. Using the above information prepare adjusting journal entries:
References
Worksheet Learning Objective: 05-A1 Compute the acid-test ratio and explain its use to assess liquidity. Learning Objective: 05-P4 Define and prepare multiple-step and single-step income statements.
Problem 5-5A Part 1Learning Objective: 05-A2 Compute the gross margin ratio and explain its use to assess profitability. Difficulty: 3 Hard Learning Objective: 05-P3 Prepare adjustments and close accounts for a merchandising company.
Problem 5-5A Part 2
2. Prepare a multiple-step income statement for fiscal year 2015.
Problem 5-5A Part 3
3. Prepare a single-step income statement for fiscal year 2015.
Problem 5-5A Part 4
4. Compute the current ratio, acid-test ratio, and gross margin ratio as of January 31, 2015. (Round your answers to 2 decimal places.)

Transcribed Image Text:

NELSON COMPANY Unadjusted Trial Balance January 31, 2015 Debit Credit $ 17,500 Cash Merchandise inventory 13,500 Store supplies 5,800 Prepaid insurance 2,600 Store equipment 43,000 S 16,150 Accumulated depreciation-Store equipment Accounts payable 15,000 J. Nelson, Capital 36,000 J. Nelson, Withdrawals 2,250 Sales 114,750 Sales discounts 2,000 Sales retums and allowances 2,250 Cost of goods sold 38,000 Depreciation expense-Store equipment Salaries expense 28,400 Insurance expense Rent expense 17,000 Store supplies expense Advertising expense 9,600 $ 181,900S 181,900 Totals