The following are the summary account balances from a recent statement of financial position of Gildan Activewear. The accounts are followed by a list of hypothetical transactions for the month of January 2011. The following accounts are shown in millions of dollars.

The accounts have normal debit or credit balances, but they are not necessarily listed in good order.

a. Purchased new equipment costing \(\$ 150\) million by issuing long-term debt.

b. Received \(\$ 900\) million on trade receivables.

c. Received and paid the telephone bills for \(\$ 1\) million.

d. Earned \(\$ 500\) million in sales to customers on account; the cost of sales was \(\$ 300\) million.

e. Paid employees \(\$ 100\) million for wages earned in January.

f. Paid half of the income taxes payable.
g. Purchased inventory for \(\$ 23\) million on account.
h. Prepaid rent for February for a warehouse for \(\$ 12\) million.
i. Paid \(\$ 10\) million of long-term borrowings and \(\$ 1\) million in interest on the debt.
j. Purchased a patent (an intangible asset) for \(\$ 8\) million cash.

Required:
1. Set up T-accounts for the preceding list and enter the respective balances. (You will need additional T-accounts for income statement accounts.)
2. For each transaction, record the effects in the T-accounts. Label each by using the letter of the transaction. Compute ending balances.
3. Show the effects (direction and amount) of each transaction on profit and cash.
4. Prepare in good form an income statement for the month of January 2011 and a classified statement of financial position as at January 31, 2011.
5. Prepare the operating activities section of the statement of cash flows for January 2011, and explain the difference between the cash flow from operating activities and the profit computed in (3).
6. Compute the company's total asset turnover ratio. What does this ratio suggest to you about Gildan Activewear?

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Cash. $ 635 Trade payables $1,822 Long-term borrowings 2,229 Income tax payable 300 Trade receivables 1,503 Prepayments 16 Inventories Deferred income taxes (credit) 551 Retained earnings 4,266 2,518 Other non-current assets 1,126 Property and equipment, net 10,759 Share capital 3,155