Rent expense and salaries expense are equally divided between selling activities
ID: 2335819 • Letter: R
Question
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 $2,300.
Expired insurance, an administrative expense, for the fiscal year is $1,750.
Depreciation expense on store equipment, a selling expense, is $1,600 for the fiscal year.
To estimate shrinkage, a physical count of ending merchandise inventory is taken. It shows $10,600 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.
Unadjusted Trial Balance
January 31, 2017 Debit Credit Cash $ 4,500 Merchandise inventory 14,000 Store supplies 5,800 Prepaid insurance 2,600 Store equipment 42,500 Accumulated depreciation—Store equipment $ 17,600 Accounts payable 14,000 Common stock 3,400 Retained earnings 17,000 Dividends 2,050 Sales 115,500 Sales discounts 2,050 Sales returns and allowances 2,300 Cost of goods sold 38,000 Depreciation expense—Store equipment 0 Salaries expense 31,000 Insurance expense 0 Rent expense 13,000 Store supplies expense 0 Advertising expense 9,700 Totals $ 167,500 $ 167,500 Answer is not complete. Complete this questions by entering your answers in the below tabs. Required 1 Required 2 Required 3 Prepare a single-step income statement for fiscal year 2017. NELSON COMPANY Income Statement For Year Ended January 31, 2017 10,600 Net sales Expenses Cost of goods sold Selling expenses General and administrative expenses Total expenses Net income K Required 2 Required3
Explanation / Answer
1. Using the above information prepare adjusting journal entries:
Date
General Journal
Debit
Credit
Jan 31
Store Supplies expenses
$2,300
Stores Supplies
$2,300
Jan 31
Insurance Expenses
$1,750
Prepaid Insurance
$1,750
Jan 31
Depreciation expense – Store Equipment
$1,600
Accumulated Depreciation – Store Equipment
$1,600
Jan 31
Cost of goods sold
$3,400
Merchandise Inventory (14,000 - 10,600)
$3,400
2. Prepare a multiple-step income statement for fiscal year 2017.
General and administrative expenses
Insurance expense
Office salaries expense
Rent expense-Office space
Total general and administrative expenses
As it is mentioned in the question Rent expense and salaries expense are equally divided between selling activities and general and administrative activities.
Ie,
Rent Expense = $13,000
Salaries Expense = $31,000
Equally Distributed among Selling activities and General activities
Rent Expenses (Selling Activities) = $6,500
Rent Expenses (General activities) = $6,500
Salaries Expense (Selling Activities) = $15,500
Salaries Expense (General activities) = $15,500
3. Prepare a single-step income statement for fiscal year 2017.
Date
General Journal
Debit
Credit
Jan 31
Store Supplies expenses
$2,300
Stores Supplies
$2,300
Jan 31
Insurance Expenses
$1,750
Prepaid Insurance
$1,750
Jan 31
Depreciation expense – Store Equipment
$1,600
Accumulated Depreciation – Store Equipment
$1,600
Jan 31
Cost of goods sold
$3,400
Merchandise Inventory (14,000 - 10,600)
$3,400