Problem 5-3A Preparing adjusting entries and income statements; and computing gross margin, acid-test, and current ratios L.O. A1, A2, P3, P4 [The following information applies to the questions displayed below.] The following unadjusted trial balance is prepared at fiscal year-end for Rex Company. REX COMPANY Unadjusted Trial Balance January 31,2011 Debit Credit Cash $ 2,200 Merchandise inventory 11,500 Store supplies 4,800 Prepaid insurance 2,300 Store equipment 41,900 Accumulated depreciation—Store equipment $ 15,000 Accounts payable 9,000 T. Rex, Capital 32,000 T. Rex, Withdrawals 2,000 Sales 104,000 Sales discounts 1,000 Sales returns and allowances 2,000 Cost of goods sold 37,400 Depreciation expense—Store equipment 0 Salaries expense 31,000 Insurance expense 0 Rent expense 14,000 Store supplies expense 0 Advertising expense 9,900 Totals $ 160,000 $ 160,000 Rent expense and salaries expense are equally divided between selling activities and the general and administrative activities. Rex Company uses a perpetual inventory system. a. Store supplies still available at fiscal year-end amount to $1,650. b. Expired insurance, an administrative expense, for the fiscal year is $1,500. c. Depreciation expense on store equipment, a selling expense, is $1,400 for the fiscal year. d. To estimate shrinkage, a physical count of ending merchandise inventory is taken. It shows $11,100 of inventory is still available at fiscal year-end. Problem 5-3A Part 1 Required: 1. Using the above information prepare adjusting journal entries (Omit the “$” sign in your response): General Journal Debit Credit a. [removed] [removed] b. [removed] [removed] c. [removed] [removed] d. [removed] [removed] Problem 5-3A Part 2 2. Prepare a multiple-step income statement for fiscal year 2011. (Input all amounts as positive values. Omit the “$” sign in your response.) REX COMPANY Income Statement For Year Ended January 31, 2011 $ [removed] $ [removed] [removed] [removed] [removed] [removed] [removed] Expenses Selling expenses [removed] [removed] [removed] [removed] [removed] Total selling expenses [removed] General and administrative expenses [removed] [removed] [removed] Total general and administrative expenses [removed] Total expenses [removed] $ [removed] Problem 5-3A Part 3 3. Prepare a single-step income statement for fiscal year 2011. (Input all amounts as positive values. Omit the “$” sign in your response.) REX COMPANY Income Statement For Year Ended January 31, 2011 $ [removed] Expenses $ [removed] [removed] [removed] Total expenses [removed] $ [removed] Problem 5-3A Part 4 4. Compute the current ratio, acid-test ratio, and gross margin ratio as of January 31, 2011. (Round your answers to 2 decimal places.) Current ratio [removed] Acid-test ratio [removed] Gross margin ratio [removed] Problem 5-4A Computing merchandising amounts and formatting income statements L.O. C2, P4 [The following information applies to the questions displayed below.] BizKid Company’s adjusted trial balance on August 31, 2011, its fiscal year-end, follows. Debit Credit Merchandise inventory $ 31,000 Other (noninventory) assets 120,400 Total liabilities $ 35,000 N. Kidman, Capital 101,650 N. Kidman, Withdrawals 8,000 Sales 212,000 Sales discounts 3,250 Sales returns and allowances 14,000 Cost of goods sold 82,600 Sales salaries expense 29,000 Rent expense—Selling space 10,000 Store supplies expense 2,500 Advertising expense 18,000 Office salaries expense 26,500 Rent expense—Office space 2,600 Office supplies expense 800 Totals $ 348,650 $ 348,650 On August 31, 2010, merchandise inventory was $25,000. Supplementary records of merchandising activities for the year ended August 31, 2011, reveal the following itemized costs. Invoice cost of merchandise purchases $ 91,000 Purchase discounts received 1,900 Purchase returns and allowances 4,400 Costs of transportation-in 3,900 Problem 5-4A Part 1 Required: 1. Compute the company’s net sales for the year. (Omit the “$” sign in your response.) Net sales $ [removed] Problem 5-4A Part 2 2. Compute the company’s total cost of merchandise purchased for the year. (Omit the “$” sign in your response.) Total cost of merchandise purchased $ [removed] Problem 5-4A Part 3 3. Prepare a multiple-step income statement that includes separate categories for selling expenses and for general and administrative expenses. (Input all amounts as positive values. Omit the “$” sign in your response.) BIZKID COMPANY Income Statement For Year Ended August 31, 2011 $ [removed] $ [removed] [removed] [removed] [removed] [removed] [removed] Expenses Selling expenses [removed] [removed] [removed] [removed] Total selling expenses [removed] General and administrative expenses [removed] [removed] [removed] Total general and administrative expenses [removed] Total expenses [removed] $ [removed] Problem 5-4A Part 4 4. Prepare a single-step income statement that includes these expense categories: cost of goods sold, selling expenses, and general and administrative expenses. (Input all amounts as positive values. Omit the “$” sign in your response.) BIZKID COMPANY Income Statement For Year Ended August 31, 2011 $ [removed] Expenses $ [removed] [removed] [removed] Total expenses [removed] $ [removed]
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