Cloutier Inc., set up as a privately held corporation, operating as a ready to wear garments retailer, of which 100% of the Common Shares are owned by Bryan Cloutier. You were hired to account for transactions for the month of June 2023, complete month end processing, prepare the financial statements and perform a financial ratio analysis as of the end of that month. They use perpetual inventory system and use the weigted average method to determine value for the inventory. Its balance sheet as at May 31, 2023, is presented below. Assets Cloutier Inc. Classified Balance Sheet As at May 31, 2023 Cash $72,560 Accounts Receivable 25,480 Merchandise Inventory 38,000 Prepaid Insurance 7,200 Total Current Assets 143,240 Long-Term Assets Equipment 166,000 Accumulated Depreciation -81,000 85,000 Total Assets $228,240 Liabilities Current Liabilities Accounts Payable $30,790 Unearned Revenue $14,500 Salaries Payable $8,250 Current Portion of Bank Loan 19,980 Total Current Liabilities $73,520 Non-Current Liabilities Non-Current Portion of Bank Loan 29,970 Total Liabilities Shareholders' Equity $103,490 Common Shares Retained Earnings Total Shareholders' Equity 81,600 43,150 Total Liabilities & Equity 124,750 $228,240 Notes Relating to Balances: Customers and balances Suppliers and Balances Lance Inc. $6,250 Zalora Co. $16,730 Knot Inc. $8,610 Mango Corp. $7,820 Mcdo Inc. $5,570 Levis Co. $6,240 Giffo Inc. $3,050 Total $30,790 Promod Inc. $2,000 Total $25,480 The bank loan has an annual interest rate of 9% and has monthly principal payment of $1,665. Notes: Round unit cost to 2 decimal places, then apply to quanity sold when determining total cost of goods sold. Use this chart to keep track of inventory values The inventory figure includes 950 units purchased at $40.00 each. Purchases Sales Date Quantity Unit Cost Value Quantity Unit Cost Value Quantity Balance Unit Cost Value 950 40.00 38,000.00 Your accountant goes through the mail and opens the bank statement for the month of June provided by Bank of Commerce. It is shown below. Bank of Commerce Prepared for Cloutier Inc. Date Information Withdrawal Deposit Balance Opening Balance 51,060.00 Jun 1 Paid Chq#5506 8,250.00 42,810.00 Jun 5 Paid Chq#5508 500.00 42,310.00 Jun 8 Deposit 21,500.00 63,810.00 Jun 14 Paid Chq#5509 16,730.00 47,080.00 Jun 14 Deposit 250,745.00 297,825.00 Jun 15 Paid Chq#5510 13,144.00 284,681.00 Jun 18 Paid Chq#5511 73,500.00 211,181.00 Jun 20 Chq#20077 5,240.00 205,941.00 Jun 25 Chq#5512 250.00 205,691.00 Jun 30 Auto debit loan payment 2,040.00 203,651.00 Jun 30 Service Charge 105.00 203,546.00 Jun 30 Interest 82.00 203,628.00 General Ledger Accounts Account: Date Cash Description GL No: PR DR CR Balance (DR or CR) Opening Balance 72,560.00 DR Jun 1 Paid Chq#5506 8,250.00 64,310.00 DR Jun 1 Paid Chq#5507 GJ3 745.00 63,565.00 DR Jun 5 Paid Chq#5508 GJ3 500.00 63,065.00 DR Jun 12 Paid Chq#5509 GJ3 16,730.00 46,335.00 DR Jun 14 Received payment GJ3 250,745.00 297,080.00 DR Jun 15 Paid Chq#5510 GJ3 13,144.00 283,936.00 DR Jun 18 Paid inventory Chq#5511 GJ3 73,500.00 210,436.00 DR Jun 20 Received payment GJ3 6,250.00 216,686.00 DR Jun 25 Petty Cash Chq#5512 GJ3 250.00 216,436.00 DR Jun 30 Paid loan GJ3 2,040.00 214,396.00 DR 101 Additional Information: a) The $21,500 is already recorded in the ledger last month. b) Cheque number of the company has (4) digits. Required: Prepare the June bank reconciliation for Cloutier Inc. 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. Cloutier Inc. Bank Reconciliation Statement June 30, 2023 Explanation Balance per books Balance per Bank 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 Unadjusted Trial Balance DR CR Cloutier Inc. Worksheet June 30, 2023 Adjustments Adjusted Trial Balance Income Statement DR CR DR CR DR CR DR Balance Sheet CR Assets Cloutier Inc. Classified Balance Sheet As at May 31, 2023 Cash $72,560 Accounts Receivable Merchandise Inventory Prepaid Insurance $25,480 $38,000 $7,200 Total Current Assets 143,240 Long-Term Assets Equipment 166,000 Accumulated Depreciation -81,000 85,000 Total Assets $228,240 Liabilities Current Liabilities Accounts Payable $30,790 Unearned Revenue $14,500 Salaries Payable $8,250 Current Portion of Bank Loan $19,980 Total Current Liabilities $73,520 Non-Current Liabilities Non-Current Portion of Bank Loan 29,970 Total Liabilities Shareholders' Equity Common Shares Retained Earnings Total Shareholders' Equity Total Liabilities & Equity $103,490 81,600 43,150 124,750 $228,240 Required: Using the balances of the General Ledger accounts as of June 30, complete the financial statements. 1) Prepare a multistep income statement. Cloutier Inc. Income Statement For the Month Ended June 30, 2023 2) Prepare a calculation of retained earnings Calculation of Retained Earnings For the Month Ended June 30, 2023 3) Prepare a classified balance sheet. Assume that $19,980 of the bank loan will be paid off in the 12 months. Cloutier Inc. Balance Sheet As at June 30, 2023 Based on the information above, answer the following questions. a) Calculate the current ratio as at June 30, 2023. b) Does Cloutier Inc. have a good or bad current ratio? Explain why or why not. c) Calculate the inventory days on hand ratio as at June 30, 2023. (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 12 days. Has the ratio improved? Why or why not? e) Calculate the debt to equity ratio as at June 30, 2023. f) Calculate the gross profit margin as at June 30, 2023. g) Last month, the gross profit margin percentage was 63%. What could have caused this decrease in gross margin percentage? h) Calculate the inventory turnover as at June 30, 2023. i) If inventory turnover last month was 2.58 is the company holding on to inventory for a longer or shorter period of time? The Chart of Accounts (GL no.) is shown below: Account Description Account # Account Description Account # ASSETS REVENUE Cash 101 Sales Revenue 400 Petty Cash 105 Sales Discounts 405 Accounts Receivable 110 Sales Returns and Allowances 410 Merchandise Inventory 120 Interest Revenue 420 Prepaid Insurance 125 Other Income 430 Equipment 140 EXPENSES Accumulated Depreciation 145 Cost of Goods Sold 500 LIABILITIES Employee Benefits Expense 510 Accounts Payable 200 Depreciation Expense 515 Interest Payable 205 Insurance Expense 520 CPP Payable 220 Interest Expense 525 El Payable 225 Office Supplies Expense 530 Income Tax Payable 230 Rent Expense 535 Salaries Payable 235 Salaries Expense 540 Unearned Revenue 240 Bank Charges Expense 545 Bank Loan 245 Maintenance Expense 550 SHAREHOLDERS' EQUITY Common Shares 300 Entertainment Expense Shipping Expense 555 560 Retained Earnings 305 Cash Over and Short 565 Required: a) Prepare the journal entries for the month of June. You will also need to update the inventory in the table for each purchase and sale, return or allowance, found under the Inventory Valuation tab of this workbook. 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) Record the journal entries from the bank reconciliation and post amounts to general ledger accounts. e) Complete the 10-column worksheet. f) Post the adjusting entries to the accounts. g) Journalize and post the adjustments. h) Prepare the multistep income statement, calculation of retained earnings, classified balance sheet found under the financial statements tab of this workbook. i) Answer the analysis questions from 'a' to 'i' found under the financial statements tab of this workbook. Transactions for the month of June: Jun 1 Jun 1 Jun 5 Jun 5 Jun 7 Jun 12 Paid the amount owing from May 31 for salaries payable amounting to $8,250, Cheque #5506. Paid rent for June amounting to $745, Cheque #5507 Cloutier Inc. decided to establish a petty cash fund for the office. A cheque #5508 of $500 was issued and cashed. Purchased merchandise from Zalora Co. on account, invoice #425; 3,400 units at $38 each. Terms of the purchase were net 30, FOB Destination. The seller paid the shipping cost amounting to $418. Note: Update the Inventory Valuation table after each purchase. Sold mechandise on accout to Knot Inc., 2,750 units at $94 each with invoice #2881. The invoice terms were 3/10, net 30, FOB Destination. Note: Update the Inventory Valuation table after each sale. Paid $16,730 with a cheque #5509 to Zalora Co. for the May invoices owing. Jun 14 Knot Inc. paid invoice #2881 less the discount. Jun 15 Jun 15 Jun 18 Jun 20 Jun 20 Jun 25 Jun 30 Jun 30 Jun 30 The employees are paid bi-weekly. Paid the payroll for the first half of June, cheque #5510. Gross pay is $18,000, CPP is $918, El is $338 and income tax is $3,600. Use the general journal to record this. Record the employer's share of CPP (100%) and El (140%) of what was deducted from employees. Bought inventory from Levis Co. with cheque #5511, 2,100 units at $35 per unit. Note: Update Inventory Valuation table to reflect purchase. Sold 940 units on account at $92 each with invoice #2882 to Giffo Inc.. The invoice term 3/10, net 30, FOB shipping point. Note: Update Inventory Valuation table. Received $6,250 from Lance Inc. for a sale on account last month. The remaining balance of the petty cash account was $250. Total expenses incurred using the petty cash fund this month amounting to $240. In this amount, it includes the shipping cost incurred on June 7 in the amount of $145 and the other costs are for the office supplies expense. Prepare the entry to replenish the petty cash fund with Chq #5512. Made monthly bank loan payment of $2,040 which includes $1,665 principal and $375 interest. Prepared the payroll for the second half of June to be paid on July 5. Gross pay is $17,900, CPP is $913, El is $337 and income tax is $3,580. 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. At the end of June, the following adjustment had to be journalized to properly report the balances of the company's accounts: Jun 30 For Prepaid Insurance, record the adjustment of $1,200 to the current month expense. Jun 30 For Unearned Revenue, $4,350 still remains unearned at the end of June. Jun 30 Monthly depreciation on the equipment was $2,150. General Journal Page 3 Date Account Title and Explanation PR DR CR Q Search General Journal Date Account Title and Explanation PR DR Page 4 CR General Ledger Accounts Account: Cash Date Description Opening Balance Account: Date Account: Date Petty Cash Description Opening Balance Accounts Receivable Description Opening Balance Account: Date Merchandise Inventory Description Opening Balance Account: Date Prepaid Insurance Description Opening Balance PR DR CR GL No: 101 Balance (DR or CR) 72,560.00 DR GL No: PR DR CR 105 Balance (DR or CR) 0.00 DR GL No: PR DR CR 110 Balance (DR or CR) 25,480.00 DR GL No: PR DR CR 120 Balance (DR or CR) 38,000.00 DR GL No: 125 PR DR CR Balance (DR or CR) 7,200.00 DR Account: Date Account: Date Equipment Description Opening Balance PR DR CR GL No: 140 Balance (DR or CR) 166,000.00 DR GL No: 145 PR DR CR Balance (DR or CR) Accumulated Depreciation Description Opening Balance 81,000.00 CR Account: Accounts Payable GL No: 200 Date Description PR DR CR Opening Balance Balance (DR or CR) 30,790.00 CR Account: Interest Payable GL No: 205 Date Description PR DR CR Opening Balance Balance (DR or CR) 0.00 CR Account: Date CPP Payable Description Opening Balance Account: Date El Payable Description Account: Date Opening Balance Income Tax Payable Description Opening Balance GL No: PR DR CR PR DR CR PR DR CR 220 Balance (DR or CR) 0.00 CR GL No: 225 Balance (DR or CR) 0.00 CR GL No: 230 Balance (DR or CR) 0.00 CR Account: Date Account: Date Salaries Payable Description Opening Balance Unearned Revenue Description Opening Balance Account: Bank Loan Date Description Opening Balance GL No: PR DR CR 235 Balance (DR or CR) 8,250.00 CR GL No: PR DR CR 240 Balance (DR or CR) 14,500.00 CR GL No: PR DR CR 245 Balance (DR or CR) 49,950.00 CR Account: Common Shares GL No: 300 Date Description PR DR CR Opening Balance Balance (DR or CR) 81,600.00 CR Account: Retained Earnings GL No: 305 Date Description PR DR CR Opening Balance Balance (DR or CR) 43,150.00 CR Account: Sales Revenue Date Description PR DR CR Account: Date Sales Discounts Description PR DR CR Account: Date Sales Returns and Allowances Description PR DR CR GL No: 400 Balance (DR or CR) GL No: 405 Balance (DR or CR) GL No: 410 Balance (DR or CR) Account: Date Account: Date Salaries Expense Description Bank Charges Expense Description Account: Entertainment Expense Date Description Account: Date Account: Date Shipping Expense Description Cash Over and Short Description PR DR CR PR DR CR PR DR CR PR DR CR PR DR CR GL No: 540 Balance (DR or CR) GL No: 545 Balance (DR or CR) GL No: 555 Balance (DR or CR) GL No: 560 Balance (DR or CR) GL No: 565 Balance (DR or CR)