Question

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

NELSON COMPANY
Unadjusted Trial Balance
January 31, 2017
Debit Credit
Cash $ 3,300
Merchandise inventory 14,000
Store supplies 5,400
Prepaid insurance 2,300
Store equipment 42,500
Accumulated depreciation—Store equipment $ 19,850
Accounts payable 15,000
Common stock 3,200
Retained earnings 16,000
Dividends 2,000
Sales 114,700
Sales discounts 1,900
Sales returns and allowances 2,150
Cost of goods sold 38,000
Depreciation expense—Store equipment 0
Salaries expense 30,700
Insurance expense 0
Rent expense 17,000
Store supplies expense 0
Advertising expense 9,500
Totals $ 168,750 $ 168,750

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 $2,800.
Expired insurance, an administrative expense, for the fiscal year is $1,500.
Depreciation expense on store equipment, a selling expense, is $1,675 for the fiscal year.
To estimate shrinkage, a physical count of ending merchandise inventory is taken. It shows $10,300 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.

Answer 1