Case: Tees R Us - Solutions Tees R Us, set up as a privately held corporation, operating as a t-shirt retailer, of which 100% of the Common Shares are owned by Tamara Green. You were hired to account for transactions for the month of February 2021, complete month end processing, prepare the financial statements and perform a financial ratio analysis as of the end of that month. They use a perpetual inventory system and use the weigted average method to determine value for the inventory. Its balance sheet as at January 31, 2021, is presented below. Tees R Us Classified Balance Sheet As at January 31, 2021 Assets Cash $35,600 Accounts Receivable 16,870 Merchandise Inventory 12,500 Prepaid Insurance Total Current Assets Long-Term Assets Equipment 162,000 Accumulated Depreciation -52,000 Total Assets 4,400 69,370 110,000 $179,370 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 $12,000 $9,000 $5,700 11,160 $37,860 23,840) $61,700 Shareholders' Equity Common Shares Retained Earnings Total Shareholders' Equity Total Liabilities & Equity 81,000 36,670 117,670 $179,370 Notes Relating to Balances: Customers and balances Suppliers and Balances Columbia Arrow Dickies Martin Short $3,200 $6,400 $4,250 $2,100 $920 Henley Als Fabrica Total $0 $7,500 $4,500 $12,000 Total $16,870 The bank loan has an annual interest rate of 5% and has monthly principal payment of $930. The inventory figure includes 500 units purchased at $25.00 each. Account # 400 105 405 410 420 430 500 510 The Chart of Accounts (GL no.) is shown below: Account Description Account # ASSETS Cash 101 Petty Cash Accounts Receivable 110 Merchandise Inventory 120 Prepaid Insurance 125 Equipment 140 Accumulated Depreciation 145 LIABILITIES Accounts Payable 200 Interest Payable 205 CPP Payable 220 EI Payable 225 Income Tax Payable 230 Salaries 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 515 520 525 530 535 540 545 550 555 560 565 Transactions for the month of February Feb 1 Feb 1 Feb 5 Feb 7 Feb 9 Pald rent for February amounting to $660, Cheque #3354 Tees R Us decided to establish a petty cash fund for the office. A cheque #3355 of $500 was issued and cashed. Purchased merchandise from Henley on account, invoice #1425, 1100 units at $28 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 Arrow, 800 units at $75 each with invoice #2341. The invoice terms were 3/10, net 30. Note: Update the Inventory Valuation Table after each sale Some of goods purchased from Henley was defective. Henley agreed to a 5% allowance on the total purchased. Note: You will need to update the inventory record to reflect the allowance as it reduces the value of the inventory Paid total liability with a cheque #3356 to Henley for the February 5 purchased less the allowance from Feb. 9. Note: You will need to update the Merchandise Inventory account to reflect any discount for early payment to supplier. The employees are paid bi-weekly. Paid the payroll for the first half of February, cheque #3357. Gross pay is $12,500, CPP is $638, El is $235 and income tax is $2,500. Use the general journal to record this. Record the employer's share of CPP (100%) and El (140%) of what was deducted from employees. Feb 12 Feb 15 Feb 15 Feb 17 Feb 18 Feb 20 Feb 20 Arrow paid invoice #2341 on time and took advantage of the early payment discount. Bought inventory from Fabrica with cheque #3358, 1400 units at $30 per unit. Note: Update Inventory Valuation table to reflect purchase Sold 600 units at $90 each with invoice #2342 to Martin. The invoice term 3/10, net 30, FOB shipping point Note: Update Inventory Valuation table. Received $3,200 from Columbia for a sale on account last month. a The remaining balance of the petty cash account was $150. Total expenses incurred using the petty cash fund this month amounting to $345. In this amount, it includes the shipping cost incurred on Feb 7 in the amount of $55 and the other costs are for the office supplies expense. Prepare the entry to replenish the petty cash fund with Chq#3359. Made monthly bank loan payment of $1,076 which includes $930 principal and $146 interest. Note: You need to debit the non-current portion of the bank loan for the principal payment. The current portion due will remain the same as the due date for the loan is greater than 12 months from balance sheet date. Feb 25 Feb 28 At the end of February, the following adjustment had to be journalized to properly report the balances of the company's accounts: Feb 28 Feb 28 Prepared the payroll for the second half of February to be paid on March 5. Gross pay is $15,000, CPP is $765, El is $282 and income tax is $3,000. The cheque will be prepared later. Use the general Journal to record this. Record the employer's share of CPP (100%) and El (140%) of what was deducted from employees. Balance of Prepaid Insurance represents 10 months left on the policy. Record the adjustment of $440 to the current month expense. of the beginning balance of unearned revenue, $2,700 still remains unearned. Feb 28 Feb 28 Feb 28 Monthly depreciation on the equipment was $1,500. Required: a) Prepare the journal entries for the month of February b) Enter the opening balances of the accounts from the opening balance sheet and post the above journal entries to the account. c) Complete the bank reconciliation report. d) Post journal entries from the bank reconciliation to general ledger accounts e) Complete the 10-column worksheet. f) Journalize and post the adjustments g) Prepare the multistep income statement, calculation of retained earnings, classified balance sheet h)Answer the analysis questions from 'a' to 'i'. General Journal Account Title and Explanation Page 3 CR Date PR DR 2021 Feb 1 Feb 1 Feb 5 Feb 7 Feb 7 Feb 9 Feb 12 Feb 15 Feb 15 Page 4 General Journal Account Title and Explanation PR DR CR Date Feb 17 Feb 18 Feb 20 Feb 20 Feb 20 Feb 25 Feb 28 Feb 28 Feb 28 Adjusting Entries General Journal Date Account Title and Explanation Feb 28 Page 5 CR PR DR Feb 28 Feb 28 Feb 28 Feb 28 General Ledger Accounts Account: Cash Date Description Opening Balance PR DR CR GL No: 101 Balance (DR or CR) 35,600.00 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 CR GL No: 110 Balance (DR or CR) 16,870.00 DR Account: Date Merchandise Inventory Description PR Opening Balance DR CR GL No: 120 Balance (DR or CR) 12,500.00 DR Account: Date Prepaid Insurance Description Opening Balance PR DR CR GL No: 125 Balance (DR or CR) 4,400.00 DR Account: Date Equipment Description Opening Balance PR DR CR GL No: 140 Balance (DR or CR) 162,000.00 DR Account: Date Accumulated Depreciation Description PR Opening Balance DR CR GL No: 145 Balance (DR or CR) 52,000.00 CR Account: Date Accounts Payable Description Opening Balance PR DR CR GL No: 200 Balance (DR or CR) 12,000.00 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: Date Salaries Payable Description Opening Balance PR DR CR GL No: 235 Balance (DR or CR) 5,700.00 CR Account: Date Unearned Revenue Description Opening Balance PR DR CR GL No: 240 Balance (DR or CR) 9,000.00 CR Account: Date Bank Loan Description Opening Balance PR DR CR GL No: 245 Balance (DR or CR) 35,000.00 CR Account: Date Common Shares Description Opening Balance PR DR CR GL No: 300 Balance (DR or CR) 81,000.00 CR Account: Date Retained Earnings Description Opening Balance PR DR CR GL No: 305 Balance (DR or CR) 36,670.00 CR Account: Date Sales Revenue Description GL NO: 400 Balance (DR or CR) PR DR CR Account: Date #REF! Sales Discounts Description PR CR DR #REF! GL No: 405 Balance (DR or CR) #REF! DR GJ3 Account: Sales Returns and Allowances Description PR GL No: 410 Balance (DR or CR) Date DR CR Account: Date Interest Revenue Description GL No: 420 Balance (DR or CR) PR DR CR Account: Date Cost of Goods Sold Description GL No: 500 Balance (DR or CR) PR DR CR GL No: 510 Account: Date Employee Benefits Expense Description PR DR CR Balance (DR or 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: Interest Expense Description GL No: 525 Balance (DR or CR) Date PR DR CR GL No: 530 Account: Date Office Supplies Expense Description PR DR CR Balance (DR or CR) Account: Date Rent Expense Description GL No: 535 Balance (DR or CR) PR DR CR Account: Date Salaries Expense Description GL No: 540 Balance (DR or CR) PR DR 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 Date Quantity Unit Cost Value Purchases Sales Unit Cost Quantity Value Quantity 500 Balance Unit Cost Value 25.00 12,500.00 Jan 31 Feb 5 Feb 7 Feb 9 Feb 12 Feb 18 Feb 20 Your accountant goes through the mail and opens the bank statement for the month of February provided by Bank of Canada. It is shown below. Date Feb 1 Feb 8 Feb 14 Feb 15 Bank of Canada Prepared for Tees R Us Information Withdrawal Deposit Opening Balance Paid Chq#3355 500.00 Deposit 11,300.00 Paid Chq#3356 28,089.60 Paid Chq#3357 9,127.00 Deposit 58,200.00 Chq#3358 42,000.00 Chq#11140 3,390.00 Chq#3359 350.00 Auto debit loan payment 1,076.00 Service Charge 34.00 Interest 290.00 Feb 17 Feb 18 Feb 19 Feb 25 Feb 28 Feb 28 Feb 28 Balance 24,300.00 23,800.00 35,100.00 7,010.40 -2,116.60 56,083.40 14,083.40 10,693.40 10,343.40 9,267.40 9,233.40 9,523.40 101 PR GJ3 GJ3 General Ledger Accounts Account: Cash Date Description Opening Balance Feb 1 Paid Chq#3354 Feb 1 Paid Chq#3355 Feb 12 Paid Chq#3356 Feb 15 Paid Chq#3357 Feb 17 Received payment Feb 18 Paid inventory Chq#3358 Feb 20 Received payment Feb 25 Petty Cash Chq#3359 Feb 28 Paid loan GJ3 GJ3 GJ3 GJ3 GJ3 GJ3 GJ3 GL No: DR CR Balance (DR or CR) 35,600.00 DR 660.00 34,940.00 DR 500.00 34,440.00 DR 28,089.60 6,350.40 DR 9,127.00 2,776.60 CR 58,200.00 55,423.40 DR 42,000.00 13,423.40 DR 3,200.00 16,623.40 DR 350.00 16,273.40 DR 1,076.00 15,197.40 DR Additional Information: a) The $11,300 is already recorded in the ledger last month. b) Cheque number of the company has only four (4) digits. Required: Prepare the February bank reconciliation for Tees R Us 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 ledger to bring the company's record up to date. Tees R Us Bank Reconciliation Statement February 28, 2021 Balance per books 15,197.40 Explanation Balance per records Balance per Bank 9,523.401 Tees R Us Worksheet February 28, 2021 Adjustments Adjusted Trial Balance Income Statement Balance Sheet Unadjusted Trial Balance DR CR DR CR DR CR DR CR DR CR Account Titles Cash Petty Cash Accounts Receivable Merchandise Inventory Prepaid Insurance Equipment Accumulated Depreciation Accounts Payable Interest Payable CPP Payable El Payable Income Tax Payable Salaries Payable Unearned Revenue Bank Loan Common Shares Retained Earnings Sales Revenue Sales Discounts Sales Returns and Allowances Interest Revenue Other Income 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 Total Net Income Totals Tees R Us Classified Balance Sheet As at January 31, 2021 Assets Cash $35,600 Accounts Receivable $16,870 Merchandise Inventory $12,500 Prepaid Insurance $4,400 Total Current Assets Long-Term Assets Equipment 162,000 Accumulated Depreciation -52,000 Total Assets 69,370 110,000 $179,370 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 $12,000 $9,000 $5,700 $11,160 $37,860 23,840 $61,700 Shareholders' Equity Common Shares Retained Earnings Total Shareholders' Equity Total Liabilities & Equity 81,000 36,670 117,670 $179,370 Required: Using the balances of the General Ledger accounts as of Feb. 28, complete the financial statements. 1) Prepare a multistep income statement. Tees R Us Income Statement For the Month Ended February 28, 2021 Sales Revenue Sales Discounts Net Sales Cost of Goods Sold Gross Profit Operating Expenses Employee Benefits Expense Depreciation Expense Insurance Expense Office Supplies Expense Rent Expense Salaries Expense Bank Charges Expense Shipping Expense 0.00 Total Operating Expenses Other Income and Expenses Interest Expense Interest Revenue Total Other Income and Expenses Net Income 2) Prepare a calculation of retained earnings Calculation of Retained Earnings For the Month Ended February 28, 2021 Retained Earnings, Beginning Add: Net Income Less: Dividends Retained Earnings, End 3) Prepare a classified balance sheet assuming the same amount per month will be paid on the bank loan for the next 12 months. Tees R Us Balance Sheet As at February 28, 2021 Assets Current Assets Cash Petty Cash Accounts Receivable Merchandise Inventory Prepaid Insurance Total Current Assets Long-Term Assets Equipment Accumulated Depreciation Total Assets Liabilities Current Liabilities Accounts Payable CPP Payable El Payable Income Tax Payable Salaries Payable Unearned Revenue Current Portion of Bank Loan Total Current Liabilities Non-Current Liabilities Non-Current Portion of Bank Loan Total Liabilities Shareholders' Equity Common Shares Retained Earnings Total Liabilities & Shareholders' Equity Based on the information above, answer the following questions. a) Calculate the current ratio as at February 28, 2021 b) Does Tees R Us have a good or bad current ratio? Explain why or why not. c) 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.) d) Last month, the inventory days on hand ratio was 39 days. Has the ratio improved? Why or why not? e) Calculate the debt to equity ratio as at February 28, 2021. f) Calculate the gross profit margin as at February 28, 2021. g) Last month, the gross profit margin percentage was 70%. What could have caused this decrease in gross margin percentage? h) Calculate the inventory turnover as at February 28, 2021. i) If inventory turnover last month was 0.81, is the company holding on to inventory for a longer or shorter period of time? Case: Tees R Us - Solutions Tees R Us, set up as a privately held corporation, operating as a t-shirt retailer, of which 100% of the Common Shares are owned by Tamara Green. You were hired to account for transactions for the month of February 2021, complete month end processing, prepare the financial statements and perform a financial ratio analysis as of the end of that month. They use a perpetual inventory system and use the weigted average method to determine value for the inventory. Its balance sheet as at January 31, 2021, is presented below. Tees R Us Classified Balance Sheet As at January 31, 2021 Assets Cash $35,600 Accounts Receivable 16,870 Merchandise Inventory 12,500 Prepaid Insurance Total Current Assets Long-Term Assets Equipment 162,000 Accumulated Depreciation -52,000 Total Assets 4,400 69,370 110,000 $179,370 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 $12,000 $9,000 $5,700 11,160 $37,860 23,840) $61,700 Shareholders' Equity Common Shares Retained Earnings Total Shareholders' Equity Total Liabilities & Equity 81,000 36,670 117,670 $179,370 Notes Relating to Balances: Customers and balances Suppliers and Balances Columbia Arrow Dickies Martin Short $3,200 $6,400 $4,250 $2,100 $920 Henley Als Fabrica Total $0 $7,500 $4,500 $12,000 Total $16,870 The bank loan has an annual interest rate of 5% and has monthly principal payment of $930. The inventory figure includes 500 units purchased at $25.00 each. Account # 400 105 405 410 420 430 500 510 The Chart of Accounts (GL no.) is shown below: Account Description Account # ASSETS Cash 101 Petty Cash Accounts Receivable 110 Merchandise Inventory 120 Prepaid Insurance 125 Equipment 140 Accumulated Depreciation 145 LIABILITIES Accounts Payable 200 Interest Payable 205 CPP Payable 220 EI Payable 225 Income Tax Payable 230 Salaries 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 515 520 525 530 535 540 545 550 555 560 565 Transactions for the month of February Feb 1 Feb 1 Feb 5 Feb 7 Feb 9 Pald rent for February amounting to $660, Cheque #3354 Tees R Us decided to establish a petty cash fund for the office. A cheque #3355 of $500 was issued and cashed. Purchased merchandise from Henley on account, invoice #1425, 1100 units at $28 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 Arrow, 800 units at $75 each with invoice #2341. The invoice terms were 3/10, net 30. Note: Update the Inventory Valuation Table after each sale Some of goods purchased from Henley was defective. Henley agreed to a 5% allowance on the total purchased. Note: You will need to update the inventory record to reflect the allowance as it reduces the value of the inventory Paid total liability with a cheque #3356 to Henley for the February 5 purchased less the allowance from Feb. 9. Note: You will need to update the Merchandise Inventory account to reflect any discount for early payment to supplier. The employees are paid bi-weekly. Paid the payroll for the first half of February, cheque #3357. Gross pay is $12,500, CPP is $638, El is $235 and income tax is $2,500. Use the general journal to record this. Record the employer's share of CPP (100%) and El (140%) of what was deducted from employees. Feb 12 Feb 15 Feb 15 Feb 17 Feb 18 Feb 20 Feb 20 Arrow paid invoice #2341 on time and took advantage of the early payment discount. Bought inventory from Fabrica with cheque #3358, 1400 units at $30 per unit. Note: Update Inventory Valuation table to reflect purchase Sold 600 units at $90 each with invoice #2342 to Martin. The invoice term 3/10, net 30, FOB shipping point Note: Update Inventory Valuation table. Received $3,200 from Columbia for a sale on account last month. a The remaining balance of the petty cash account was $150. Total expenses incurred using the petty cash fund this month amounting to $345. In this amount, it includes the shipping cost incurred on Feb 7 in the amount of $55 and the other costs are for the office supplies expense. Prepare the entry to replenish the petty cash fund with Chq#3359. Made monthly bank loan payment of $1,076 which includes $930 principal and $146 interest. Note: You need to debit the non-current portion of the bank loan for the principal payment. The current portion due will remain the same as the due date for the loan is greater than 12 months from balance sheet date. Feb 25 Feb 28 At the end of February, the following adjustment had to be journalized to properly report the balances of the company's accounts: Feb 28 Feb 28 Prepared the payroll for the second half of February to be paid on March 5. Gross pay is $15,000, CPP is $765, El is $282 and income tax is $3,000. The cheque will be prepared later. Use the general Journal to record this. Record the employer's share of CPP (100%) and El (140%) of what was deducted from employees. Balance of Prepaid Insurance represents 10 months left on the policy. Record the adjustment of $440 to the current month expense. of the beginning balance of unearned revenue, $2,700 still remains unearned. Feb 28 Feb 28 Feb 28 Monthly depreciation on the equipment was $1,500. Required: a) Prepare the journal entries for the month of February b) Enter the opening balances of the accounts from the opening balance sheet and post the above journal entries to the account. c) Complete the bank reconciliation report. d) Post journal entries from the bank reconciliation to general ledger accounts e) Complete the 10-column worksheet. f) Journalize and post the adjustments g) Prepare the multistep income statement, calculation of retained earnings, classified balance sheet h)Answer the analysis questions from 'a' to 'i'. General Journal Account Title and Explanation Page 3 CR Date PR DR 2021 Feb 1 Feb 1 Feb 5 Feb 7 Feb 7 Feb 9 Feb 12 Feb 15 Feb 15 Page 4 General Journal Account Title and Explanation PR DR CR Date Feb 17 Feb 18 Feb 20 Feb 20 Feb 20 Feb 25 Feb 28 Feb 28 Feb 28 Adjusting Entries General Journal Date Account Title and Explanation Feb 28 Page 5 CR PR DR Feb 28 Feb 28 Feb 28 Feb 28 General Ledger Accounts Account: Cash Date Description Opening Balance PR DR CR GL No: 101 Balance (DR or CR) 35,600.00 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 CR GL No: 110 Balance (DR or CR) 16,870.00 DR Account: Date Merchandise Inventory Description PR Opening Balance DR CR GL No: 120 Balance (DR or CR) 12,500.00 DR Account: Date Prepaid Insurance Description Opening Balance PR DR CR GL No: 125 Balance (DR or CR) 4,400.00 DR Account: Date Equipment Description Opening Balance PR DR CR GL No: 140 Balance (DR or CR) 162,000.00 DR Account: Date Accumulated Depreciation Description PR Opening Balance DR CR GL No: 145 Balance (DR or CR) 52,000.00 CR Account: Date Accounts Payable Description Opening Balance PR DR CR GL No: 200 Balance (DR or CR) 12,000.00 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: Date Salaries Payable Description Opening Balance PR DR CR GL No: 235 Balance (DR or CR) 5,700.00 CR Account: Date Unearned Revenue Description Opening Balance PR DR CR GL No: 240 Balance (DR or CR) 9,000.00 CR Account: Date Bank Loan Description Opening Balance PR DR CR GL No: 245 Balance (DR or CR) 35,000.00 CR Account: Date Common Shares Description Opening Balance PR DR CR GL No: 300 Balance (DR or CR) 81,000.00 CR Account: Date Retained Earnings Description Opening Balance PR DR CR GL No: 305 Balance (DR or CR) 36,670.00 CR Account: Date Sales Revenue Description GL NO: 400 Balance (DR or CR) PR DR CR Account: Date #REF! Sales Discounts Description PR CR DR #REF! GL No: 405 Balance (DR or CR) #REF! DR GJ3 Account: Sales Returns and Allowances Description PR GL No: 410 Balance (DR or CR) Date DR CR Account: Date Interest Revenue Description GL No: 420 Balance (DR or CR) PR DR CR Account: Date Cost of Goods Sold Description GL No: 500 Balance (DR or CR) PR DR CR GL No: 510 Account: Date Employee Benefits Expense Description PR DR CR Balance (DR or 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: Interest Expense Description GL No: 525 Balance (DR or CR) Date PR DR CR GL No: 530 Account: Date Office Supplies Expense Description PR DR CR Balance (DR or CR) Account: Date Rent Expense Description GL No: 535 Balance (DR or CR) PR DR CR Account: Date Salaries Expense Description GL No: 540 Balance (DR or CR) PR DR 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 Date Quantity Unit Cost Value Purchases Sales Unit Cost Quantity Value Quantity 500 Balance Unit Cost Value 25.00 12,500.00 Jan 31 Feb 5 Feb 7 Feb 9 Feb 12 Feb 18 Feb 20 Your accountant goes through the mail and opens the bank statement for the month of February provided by Bank of Canada. It is shown below. Date Feb 1 Feb 8 Feb 14 Feb 15 Bank of Canada Prepared for Tees R Us Information Withdrawal Deposit Opening Balance Paid Chq#3355 500.00 Deposit 11,300.00 Paid Chq#3356 28,089.60 Paid Chq#3357 9,127.00 Deposit 58,200.00 Chq#3358 42,000.00 Chq#11140 3,390.00 Chq#3359 350.00 Auto debit loan payment 1,076.00 Service Charge 34.00 Interest 290.00 Feb 17 Feb 18 Feb 19 Feb 25 Feb 28 Feb 28 Feb 28 Balance 24,300.00 23,800.00 35,100.00 7,010.40 -2,116.60 56,083.40 14,083.40 10,693.40 10,343.40 9,267.40 9,233.40 9,523.40 101 PR GJ3 GJ3 General Ledger Accounts Account: Cash Date Description Opening Balance Feb 1 Paid Chq#3354 Feb 1 Paid Chq#3355 Feb 12 Paid Chq#3356 Feb 15 Paid Chq#3357 Feb 17 Received payment Feb 18 Paid inventory Chq#3358 Feb 20 Received payment Feb 25 Petty Cash Chq#3359 Feb 28 Paid loan GJ3 GJ3 GJ3 GJ3 GJ3 GJ3 GJ3 GL No: DR CR Balance (DR or CR) 35,600.00 DR 660.00 34,940.00 DR 500.00 34,440.00 DR 28,089.60 6,350.40 DR 9,127.00 2,776.60 CR 58,200.00 55,423.40 DR 42,000.00 13,423.40 DR 3,200.00 16,623.40 DR 350.00 16,273.40 DR 1,076.00 15,197.40 DR Additional Information: a) The $11,300 is already recorded in the ledger last month. b) Cheque number of the company has only four (4) digits. Required: Prepare the February bank reconciliation for Tees R Us 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 ledger to bring the company's record up to date. Tees R Us Bank Reconciliation Statement February 28, 2021 Balance per books 15,197.40 Explanation Balance per records Balance per Bank 9,523.401 Tees R Us Worksheet February 28, 2021 Adjustments Adjusted Trial Balance Income Statement Balance Sheet Unadjusted Trial Balance DR CR DR CR DR CR DR CR DR CR Account Titles Cash Petty Cash Accounts Receivable Merchandise Inventory Prepaid Insurance Equipment Accumulated Depreciation Accounts Payable Interest Payable CPP Payable El Payable Income Tax Payable Salaries Payable Unearned Revenue Bank Loan Common Shares Retained Earnings Sales Revenue Sales Discounts Sales Returns and Allowances Interest Revenue Other Income 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 Total Net Income Totals Tees R Us Classified Balance Sheet As at January 31, 2021 Assets Cash $35,600 Accounts Receivable $16,870 Merchandise Inventory $12,500 Prepaid Insurance $4,400 Total Current Assets Long-Term Assets Equipment 162,000 Accumulated Depreciation -52,000 Total Assets 69,370 110,000 $179,370 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 $12,000 $9,000 $5,700 $11,160 $37,860 23,840 $61,700 Shareholders' Equity Common Shares Retained Earnings Total Shareholders' Equity Total Liabilities & Equity 81,000 36,670 117,670 $179,370 Required: Using the balances of the General Ledger accounts as of Feb. 28, complete the financial statements. 1) Prepare a multistep income statement. Tees R Us Income Statement For the Month Ended February 28, 2021 Sales Revenue Sales Discounts Net Sales Cost of Goods Sold Gross Profit Operating Expenses Employee Benefits Expense Depreciation Expense Insurance Expense Office Supplies Expense Rent Expense Salaries Expense Bank Charges Expense Shipping Expense 0.00 Total Operating Expenses Other Income and Expenses Interest Expense Interest Revenue Total Other Income and Expenses Net Income 2) Prepare a calculation of retained earnings Calculation of Retained Earnings For the Month Ended February 28, 2021 Retained Earnings, Beginning Add: Net Income Less: Dividends Retained Earnings, End 3) Prepare a classified balance sheet assuming the same amount per month will be paid on the bank loan for the next 12 months. Tees R Us Balance Sheet As at February 28, 2021 Assets Current Assets Cash Petty Cash Accounts Receivable Merchandise Inventory Prepaid Insurance Total Current Assets Long-Term Assets Equipment Accumulated Depreciation Total Assets Liabilities Current Liabilities Accounts Payable CPP Payable El Payable Income Tax Payable Salaries Payable Unearned Revenue Current Portion of Bank Loan Total Current Liabilities Non-Current Liabilities Non-Current Portion of Bank Loan Total Liabilities Shareholders' Equity Common Shares Retained Earnings Total Liabilities & Shareholders' Equity Based on the information above, answer the following questions. a) Calculate the current ratio as at February 28, 2021 b) Does Tees R Us have a good or bad current ratio? Explain why or why not. c) 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.) d) Last month, the inventory days on hand ratio was 39 days. Has the ratio improved? Why or why not? e) Calculate the debt to equity ratio as at February 28, 2021. f) Calculate the gross profit margin as at February 28, 2021. g) Last month, the gross profit margin percentage was 70%. What could have caused this decrease in gross margin percentage? h) Calculate the inventory turnover as at February 28, 2021. i) If inventory turnover last month was 0.81, is the company holding on to inventory for a longer or shorter period of time