Fundamental Accounting Principles 22th Edition by John Wild ,Ken Shaw,Barbara Chiappetta

Exercise 2

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

Rent expense and salaries expense are equally divided between selling activities and the general and administrative activities. Foster Products Company uses a perpetual inventory system.
Required
1. Prepare adjusting journal entries to reflect each of the following.
a. Store supplies still available at fiscal year-end amount to $3,700.
b. Expired insurance, an administrative expense, for the fiscal year is $2,800.
c. Depreciation expense on store equipment, a selling expense, is $3,000 for the fiscal year.
d. To estimate shrinkage, a physical count of ending merchandise inventory is taken. It shows $21,300 of inventory is still available at fiscal year-end.
2. Prepare a multiple-step income statement for fiscal year 2015.
3. Prepare a single-step income statement for fiscal year 2015.
4. Compute the current ratio, acid-test ratio, and gross margin ratio as of October 31, 2015. (Round ratios to two decimals.)