Common stock 5000 retained earnings 27000 dividends

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Commonstock5,000Retainedearnings27,000Dividends2,200Sales111,950Salesdiscounts2,000Salesreturns andallowances2,200Cost ofgoods sold38,400Depreciationexpense—Storeequipment0Salariesexpense35,000Insuranceexpense0Rentexpense15,000Storesuppliesexpense0Advertisingexpense9,800Totals$169,200$169,200Rent expense and salaries expense are equally divided between selling activities and the general andadministrative activities. Nelson Company uses a perpetual inventory system.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 $10,900of inventory is still available at fiscal year-end.DateGeneral JournalDebitCreditJan 31Store supplies expense4,050Store supplies4,050Jan 31Insurance expense1,400Prepaid insurance1,400Jan 31Depreciation expense—Store equipment1,525
Accumulated depreciation—Store equipment1,525Jan 31Cost of goods sold1,600Merchandise inventory1,6002.Prepare a multiple-step income statement for fiscal year 2013.
3.Prepare a single-step income statement for fiscal year 2013.
For Year Ended January 31, 2013Net sales$107,750ExpensesCost of goods sold$40,000Selling expenses40,375General and administrativeexpenses26,40000Total expenses106,775Net income$975Current ratio1.47Acid-test ratio0.10Gross margin ratio0.63Current assetsCash$1,000Merchandise inventory10,900Storesupplies1,750Prepaidinsurance1,000*Total currentassets$14,650Currentliabilities$10,000Current ratio($14,650 /$10,000)1.47Prepaid insurance: $2,400 – $1,400 = $1,000Merchandise inventory: $12,500 – $1600 = $10,900Quick assets (Cash)$ 1,000Current liabilities$10,000Acid-test ratio ($1,000 / $10,000)0.10Net Sales$107,750
Cost of goods sold40,000Gross margin$67,750Gross margin ratio($67,750 / $107,750)0.63

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