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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.

  

 

$2,200

   

 

  

 

 

  

 

  

 

  

  $

   

   

 2,000    

   

 

  

 2,000    

 

  

 0    

 

 

  

 0    

 

 

  

 0    

 

  

 

$

$160,000  

 

REX COMPANY Unadjusted Trial Balance January 31,2011

Debit

Credit

  Cash

  Merchandise inventory

11,50

0  

  Store supplies

4,

800

  Prepaid insurance

2,300  

  Store equipment

4

1,900  

  Accumulated depreciation—Store equipment

15,000  

  Accounts payable

9,000  

  T. Rex, Capital

3

2,000  

  T. Rex, Withdrawals

  Sales

104,000  

  Sales discounts

1,000  

  Sales returns and allowances

  Cost of goods sold

37,400  

  Depreciation expense—Store equipment

  Salaries expense

31,000

  Insurance expense

  Rent expense

14,000

  Store supplies expense

  Advertising expense

9,900  

  Totals

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.

b.

c.

d.

Store supplies still available at fiscal year-end amount to $1,650.

Expired insurance, an administrative expense, for the fiscal year is $1,500.

Depreciation expense on store equipment, a selling expense, is $1,400 for the fiscal year.

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

1.

Required:

Using the above information prepare adjusting journal entries (Omit the “$” sign in your response):

  

 

DebitCredit

a.  

 

 

    [removed] 

b.  

 

  [removed] 

     

c.  [removed]  

      

   [removed]  

    

d.  [removed]  

       

  [removed] 

General Journal

[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.)

 

 

  

 

  

$ [removed]  

  [removed] [removed]  

    [removed]

 

    [removed]  

     [removed]  

  

   

  

  

   

    [removed] 

      [removed]  

     [removed]       [removed]    

[removed]  

   

  

     [removed]       [removed]       [removed]    

[removed]  

  

 [removed] 

  

   $ [removed] 

  

REX COMPANY Income Statement For Year Ended January 31, 2011

$ [removed] 

  Expenses

  Selling expenses

[removed]   

 

    Total selling expenses

  General and administrative expenses

 

    Total general and administrative expenses

   

  Total expenses

 

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

   

Expenses  

     $ [removed]  

     [removed]       [removed]       

  Total expenses [removed]   

   $ [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.)

 

  

[removed]  

[removed]  

[removed] 

  Current ratio

  Acid-test ratio

  Gross margin ratio

 

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    

  

    

    $

 

     

 

  

    

  Sales     

 

  Sales discounts  

    

  Sales returns and allowances  14,000      Cost of goods sold  

    

  

    

  

    

  Store supplies expense  

    

  Advertising expense  

    

  

    

  2,600    

  800    

    

  Totals $

 $348,650 

    

  Other (noninventory) assets

120,400

  Total liabilities

35,000

  N. Kidman, Capital

101,650

  N. Kidman, Withdrawals

8,000

212,000

3,250

8

2,600

  Sales salaries expense

29,000

  Rent expense—Selling space

10,000

2,500

18,000

  Office salaries expense

26,500

  Rent expense—Office space

  Office supplies expense 

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.

 

   

$

 1,900  

 

 

  Invoice cost of merchandise purchases

91,000  

  Purchase discounts received

  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.)

 

$ [removed] 

  Net sales

 

Problem 5-4A Part 2

2.

Compute the company’s total cost of merchandise purchased for the year. (Omit the “$” sign in your response.)

 

$ [removed] 

  Total cost of merchandise purchased

 

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.)

 

   $ [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]  

   

BIZKID COMPANY Income Statement For Year Ended August 31, 2011

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]    

 [removed] 

     $ [removed] 

 

     Total expenses

 

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