Question #1 (35 marks)

On January 1, 2018, Safa formed a computer sales and service enterprise in Halifax by investing $90,000 cash. The journal entry on January 1, 2018 was:

Cash $90,000

Capital $90,000.

The new company, Safa Sales and Service, sells 3 types of products: Ghana computers, Ivory computers, and Togo printers. Safa has the following transactions during January:

(i.)

Pays $6,000 in advance for 3 months rent of office space.

(ii.)

Purchases 40 Ghana computers at a cost of $1,500 each, 6 Ivory computers at a cost of $3,000 each, and 25 Togo printers at a cost of $450 each, paying cash upon delivery.

(iii.)

Sales, repair, and office employees earn $12,600 in salaries during January, of which $3,000 was still payable at the end of January.

(iv.)

Sells 30 Ghana computers at $2,550 each, 4 Ivory computers for $4,500 each, and 15 Togo printers for $750 each; $75,000 is received in cash in January and $30,750 is sold on deferred payment plan. (That is, $30,750 is yet to be received in cash).

(v.)

Other operating expenses (OPE) of $8,400 are incurred and paid for during January; $2,000 of incurred expenses in January are payable (accrued liabilities) in February.

The following journal entries are prepared for your convenience:

(i.)

Prepaid rent $6,000

Cash $6,000

(ii.)

Purchases $89,250

Cash $89,250

(iii.)

Wages $12,600

Cash $9,600

W/P $3,000

(iv.)

Cash $75,000

A/R $30,750

Sales $105,750

(v)

OPE $10,400

Cash $8,400

Accrued liability $2,000

Required:

a.

Calculate CGS. 5 marks.

Prepare (an accrual basis) I/S for the month of January. Use the format below:

6 marks

Sales	$105,750
CGS
GP
Operating expenses:
Rent
Wages
OPE
Total operating expenses
NI

Show calculations.

b.

10 marks

Prepare CFO using the DIRECT method.

Cash received from customers
Cash Disbursements For:
Purchases
Rent
Wages
OPE
Total disbursements
CFO

c.

4 marks

Find the total amount debited to the cash account.

Find the total amount credited to the cash account. Now calculate the cash balance at the end of January.

d.

10 marks

Prepare B/S as of January 31, 2018

Assets	Liabilities and Equity