Case: DITO Shoppee Solutions DITO Shoppee owned by Graham Smith, Is an freestyle clothing retailer You were hired to account the transactions and report the status of the business. They use the perpetua inventory system and use the wested average method to determine value for the inventory, its balance sheet as at January 31, 2021, la presented below. DITO Shoppee classified Balance Sheet As at January 31 2021 Assets Cash $32,400 Accounts Receivable 16,820 Merchandise tnventory 37 200 Prepaid insurance 3.200 Total Current Assets Long-Term Assets Equipment 145,000 Accumulated Depreciation -40,000 Total Assets 89,6201 ROS.000 5294,620 Liabilities Current liabilities Accounts Payable Unearned Revenue Salarles Payable Current Portion of Bank Loan Total Current Liabilities Non-Current Liabilities Non-Current Portion of Bank Loan Total Liabilities $13 100 S9.200 53.400 10.550 536.2501 29,440 555,700 Shareholders Equity Common Shares Retained Earnings Total Shareholders' Equity Total Liabilities & Equity 72,000 56.920 138,929 $194,6201 The bank loan has an annual interest rate of 8% and has monthly principal payment of 5880 The Inventory figure includes 1.200 units purchased at $31.00 each Account 400 405 410 420 430 The Chart of Accounts (GL no. is shown below: Account Description Account ASSETS Cash 101 Petty Cash 105 Accounts Recevable 110 Merchandise Inventory 120 Prepaid Insurance 125 Equipment 140 Accumulated Depreciation 145 LIABILITIES Accounts Payable 200 Interest Payable 205 CPP Payable 220 El Payable 225 Income Tax Payable 230 Salarles Payable 235 Unearned Revenue 240 Bank Loan 245 SHAREHOLDERS' EQUITY Common Shares 300 Retained Earnings 305 Account Description REVENUE Sales Revenue Sales Discounts Sales Returns and Allowances Interest Revenue Other income EXPENSES Cost of Goods Sold Employee Benefits Expense Depreciation Expense Insurance Expense Interest Expense Office Supplies Expense Rent Expense Salaries Expense Bank Charges Expense Maintenance Expense Entertainment Expense Shipping Expense Cash Over and Short 500 510 515 520 525 530 535 540 545 550 555 560 565 Transactions for the month of February: Feb 1 Feb 1 Feb 5 Paid rent for February amounting to $520, Cheque #2314 DITO Shoppee decided to establish a petty cash fund for the office. A cheque #2315 of $500 was issued and cashed. Purchased merchandise from Canadian Polo Inc. on account, invoice #425; 800 units at $25 each. Terms of the purchase were 4/10, net 30, FOB Destination. The seller paid the shipping cost amounting to $55. Update the inventory table after each purchase. Sold mechandise to Lee, 750 units at $95 each with invoice #1120. The invoice terms were 3/10, net 30, FOB Destination. DITO Shoppee paid the $40 to ship the goods to Lee. They used petty cash fund to pay. Update the inventory table after each sale. Some of goods purchased from Canadian Polo Inc. was defective. Canadian Polo Inc. agreed to a 30% allowance on the total purchased. Paid total liability with a cheque #2316 to Canadian Polo Inc. for the February 6 purchased. Feb 7 Feb 9 Feb 12 Feb 17 Feb 18 Feb 20 Feb 20 Lee paid invoice #1120 on time and took advantage of the early payment discount. Bought inventory from Coleman with cheque #2317, 900 units at $28 per unit. Sold 200 units at $90 each with invoice #1121 to Guess. The invoice term 3/10, net 30, FOB shipping point Received $1,000 from Prinsted Shirt Inc for a sale on account last month. The remaining balance of the petty cash account was $245. Total expenses incurred using the petty cash fund this month amounting to $250. In this amount, it includes the shipping cost incurred on Feb 7 and the other costs are for the office supplies expense. Prepare the entry to replenish the petty cash fund with Chq#2318 Feb 25 Feb 28 Prepared the payroll for February to be paid on March 5. Gross pay is $12,300, CPP is $627, El is $231 and income tax is $2,460. The employer matches CPP contributions and pays 1.4 times the El deduction. Use the general journal to record this. The cheque will be prepared later. Feb 28 Made monthly bank loan payment of $1,080 which includes $880 principal and $200 interest. Record the transactions above in the general journal. General Journal Account Title and Explanation Date Page 3 CR PR DR General Journal Account Title and Explanation Date Page 3 CR PR DR General Ledger Accounts Account: Cash Date Description Opening Balance PR DR CR GL No: 101 Balance (DR or CR) 32.400.00 DR Account: Date Petty Cash Description Opening Balance PR DR CR GL No: 105 Balance (DR or CR) 0.00 DR Account: Date Accounts Receivable Description Opening Balance PR DR OR GL No: 110 Balance (DR or CR) 16,820 00 DR Account: Date Merchandise Inventory Description PR Opening Balance DR CR GL No: 120 Balance (DR or CR) 37 200.00 OR Account: Date Prepaid Insurance Description Opening Balance PR DR CR GL Moc 125 Balance (DR or CR) 3.200.00 OR Account Equipment Date Description Opening Balance PR DR CR GL No: 140 Balance (DR or CR) 145,000.00 DR Account: Date Accumulated Depreciation Description PR Opening Balance DR CR GL No: 145 Balance (DR OR CR) 40,000.00 CR Account: Date Accounts Payable Description Opening Balance PR DR CR GL No: 200 Balance (DR or CR) 13,100.00 CR Account: Date Interest Payable Description Opening Balance PR DR CR GL No: 205 Balance (DR or CR) 0.00 CR Account: Date CPP Payable Description Opening Balance PR DR CR GL No: 220 Balance (DR or CR) 0.00 CR Account: Date El Payable Description Opening Balance PR DR CR GL No: 225 Balance (DR or CR) 0.00 CR Account: Date Income Tax Payable Description Opening Balance PR DR CR GL No: 230 Balance (DR or CR) 0.00 CR Account: Salaries Payable GL No: 235 Date PR DR 18 Description Opening Balance Balance (DR or CR) 3.400.00 CR Account: Date Unearned Revenue Description Opening Balance PR DR CR GL No: 240 Balance (DR or CR) 9.200.00 ICR Account: Date Bank Loan Description Opening Balance PR DR CR GL NO: 245 Balance (DR or CR 30.000 OC CR Account: Date Common Shares Description Opening Balance PR DR CR GL No: 300 Balance (DR or CR) 72,000.00 CR Account: Date Retained Earnings Description Opening Balance PR DR CR GL NO: 305 Balance (DR or CR) 66,920.00 CR Account: Date Sales Revenue Description GL NO: 400 Balance (DR or CR) PR DR OR Account: Date Sales Discounts Description PR DR CR GL No: 405 Balance (DR or CR) Account: Date Sales Returns and Allowances Description PR GL. No: 410 Balance (DR or CR) DR CR Account: Date Interest Revenue Description PR DR GL NO Balance IDR or CRT Account Date Cost of Goods Sold Description PR OL NO: 500 Balance (or CM) DR CR Account: Date Employee Benefits Expense Description PR OL No: 510 Balance (DR OF CR) DR CR Account: Date Depreciation Expense Description GL No: 515 Balance (DR or CR) PR DR CR Account: Date Insurance Expense Description GL No: 520 Balance (DR or CR) PR DR CR Account: Date Interest Expense Description PR GL No: 525 Balance (DR or CR) OR CR 530 Account: Date Office Supplies Expense Description PR GL No: Balance (DR or CR) DR CR Account: Date 535 Rent Expense Description GL No: Balance (DR or CR) PR DR CR Account: Date Salaries Expense Description GL No: 540 Balance (DR or CR) PR OR CR Account: Date Bank Charges Expense Description GL No: 545 Balance (DR or CR) PR DR CR Account: Date Entertainment Expense Description PR GL No: 555 Balance (DR or CR) DR CR Account: Date Shipping Expense Description GL No: 560 Balance (DR or CR) PR DR CR Account: Date Cash Over and Short Description GL No: 565 Balance (DR or CR) PR DR CR Use this chart to keep track of inventory values Purchases Date Quantity Unit Cost Value Sales Quantity Unit Cost Value Quantity 1,200 Balance Unit Cost Value 31.00 37,200.00 Your accountant poes through the mail and opens the bank statement for the month of February provided by wel shown below Wells Fargo Local Bank Prepared for DITO Shoppee Date Information Withdrawal Deposit Opening Balance Feb 1 Cha#2315 500.00 Feb 8 Deposit 9 540.000 Feb 14 Chou2316 13.440.00 Feb 17 Deposit 69 112.50 Feb 18 Chh2317 25,200.00 Feb 19 Cha#10428 2.400.00 Feb 25 Petty Cash Cho#2318 255.00 Feb 28 Auto debit loan payment 1080.00 Feb 28 Service Charge 150.00 Feb 28 Interest 212.00 Balance 22.860.00 22.360.00 31.900.00 28,460 00 87,572.50 62.372.50 59.97250 59,717.50 58.637.50 58,487.50 58. 699 50 101 Date PR General Ledger Accounts Account: Cash Description Opening Balance Feb 1 Paid Choa2314 Feb 1 Paid Cho#2315 Feb 13 Paid Cha#2316 Feb 17 Received payment Feb 18 Paid inventory Cho#2317 Feb 20 Received payment Reb 25 Petty Cash Cho#2318 Feb 28 Paid loan G13 G3 G13 G3 G3 G13 613 G13 GL No: DR CR Balance (DR or CR) 32,400.00 DR 520.00 31.880.00 OR Sod 31,380.00 DR 23.440.00 17.940.00 DR 69,112.50 87.052.50 DR 25 200.00 61,852.50 DR 1.000.00 62.852.50 DR 255 62,597.50 DR 1.080.00 61.517.50 DR Additional Information: a) The $9.540 is already recorded in the ledger last month b) Cheque number of the company has only three (4) digits. Required: Prepare the February bank reconciliation for DITO Shoppee using the bank statement and general ledger provided. Compare the information in the general ledger to the bank statement. Once reconciled, record the relevant journal entries in the general journal and post the entries in the general leder to bring the company's record up to date. DITO Shoppee Bank Reconciliation Statement February 28, 2021 Balance per books Explanation Balance per Bank DITO Shoppee Classified Balance Sheet As at January 31, 2021 Assets Cash $32.400 Accounts Receivable $16,820 Merchandise Inventory $37,200 Prepaid Insurance $3,200 Total Current Assets Long-Term Assets Equipment 145,000 Accumulated Depreciation -40.000 Total Assets 89,620 105.000 $194,620 Liabilities Current Liabilities Accounts Payable Unearned Revenue Salaries Payable Current Portion of Bank Loan Total Current Liabilities Non-Current Liabilities Non-Current Portion of Bank Loan Total Liabilities $13,100 $9,200 $3,400 $10.560 $36,260 19440 $55,700 Shareholders' Equity Common Shares Retained Earnings Total Shareholders' Equity Total Liabilities & Equity 72,000 66.920 138.920 $194.620 Required: Using the balances of the General Ledger accounts as of Feb. 28, complete the financial statement 1) Prepare a multistepincome statement. DITO Shoppee Income Statement For the Month Ended February 28, 2021 2) Prepare a calculation of retained earnings Calculation of Retained Earnings For the Month Ended February 28, 2021 3) Prepare a classified balance sheet. Assume that $10.560 of the bank loan will be paid off in the 12 months DITO Shoppee Balance Sheet As at February 28, 2021 Based on the information above, answer the following questions, a) Calculate the current ratio as at February 28, 2021 b) Does DITO Shoppee have a good or bad current ratio? Explain why or why not. Calculate the inventory days on hand ratio as at February 28 2021. Since this is for the month, do not multiply by 365 in the formula, instead multiply by 31 days) o Last month, the inventory days on hand ratio was 37 days. Has the ratio improved? Why or why not? e) Calculate the debt to equity ratio as at February 28, 2021 Calculate the gross profit margin as at February 28, 2021 El last month, the gross profit margin percentage was 72%. What could have caused this decrease in pross marpin percentage? h) Calculate the inventory turnover as at February 28, 2021 i) If inventory turnover last month was 0.745, is the company holding on to inventory for a longer or shorter period of time