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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. |
| REX COMPANY Unadjusted Trial Balance January 31,2011 |
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| 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 | |||
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| Totals | $ | 160,000 | $ | 160,000 |
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| 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] | ||
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| b. | [removed] | ||
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Problem 5-3A Part 2
| 2. | Prepare a multiple-step income statement for fiscal year 2011. (Input all amounts as positive values. Omit the “$” sign in your response.) |
| REX COMPANY Income Statement For Year Ended January 31, 2011 |
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| Expenses | ||
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| Total selling expenses | [removed] | |
| General and administrative expenses | ||
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| Total general and administrative expenses | [removed] | |
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Problem 5-3A Part 3
| 3. | Prepare a single-step income statement for fiscal year 2011. (Input all amounts as positive values. Omit the “$” sign in your response.) |
| REX COMPANY Income Statement For Year Ended January 31, 2011 |
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| Expenses | ||
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| Total expenses | [removed] | |
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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 | ||||||
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| Totals | $ | 348,650 | $ | 348,650 | |||
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| 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 “$” sign in your response.) |
| BIZKID COMPANY Income Statement For Year Ended August 31, 2011 |
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| Total selling expenses | [removed] | |
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Problem 5-4A Part 4
| 4. | Prepare a single-step income statement that includes these expense categories: cost of goods sold, selling expenses, and general and administrative expenses. (Input all amounts as positive values. Omit the “$” sign in your response.) |
| BIZKID COMPANY Income Statement For Year Ended August 31, 2011 |
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| Total expenses | [removed] | |
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