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 endprocessing, 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 January 31, 2021, is presented below. Tees R Us Classified Balance Sheet As at January 31, 2021 Assets Cash Accounts Receivable $35,600 16,870 Merchandise Inventory 12,500 Prepaid Insurance 4,400 Total Current Assets 69,370 Long-Term Assets Equipment 162,000 Accumulated Depreciation -52.000 110.000 Total Assets $179,370 Liabilities Current Liabilities Accounts Payable $12,000 Unearned Revenue $9,000 Salaries Payable $5,700 Current Portion of Bank Loan 11,160 Total Current Liabilities $37,860 Non-Current Liabilities Non-Current Portion of Bank Loan 23,840 Total Liabilities $61,700 Shareholders' Equity Common Shares Retained Earnings Total Shareholders' Equity Total Liabilities & Equity Notes Relating to Balances: 81,000 36.670 117.670 $179,370 Although we are not using special journals and subsidiary ledgers, we have provided the customer and supplier names and account balances for your reference below: Columbia Arrow Dickies Martin Short Total Customers and balances Suppliers and Balances $3,200 Henley 50 $6,400 Als $7.500 $4,250 Fabrica $4,500 $2,100 Total $12,000 $920 $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. 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 Entertainment Expense 555 Common Shares 300 Shipping Expense 560 Retained Earnings 305 Cash Over and Short 565 Required: a) Prepare the journal entries for the month of February. 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 c) Complete the bank reconciliation report. d) Record and post journal entries from the bank reconciliation to general ledger accounts e) Complete the 10-column worksheet. e) Post the adjusting entries to the accounts 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 'T' (found at bottom on Financial Statements tab) Transactions for the month of February: a) Feb 1 Feb 11 Feb 5 Feb 7 Feb 9 Feb 12 Feb 15 Feb 15 Feb 17 Feb 18 Feb 201 Feb 201 Paid 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 #425; 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. Note: Update the Inventory Valuation table after each purchase. Sold mechandise on accout to Arrow, 800 units at $75 each with invoice #2341. The invoice terms were 3/10, net 30, FOB Destination. Note: Update the Inventory Valuation table after each sale. Some of goods purchased from Henley were defective. Henley agreed to a 5% allowance on the total purchased. Note: You will need to update the Inventory Valuation table 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. 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. 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 on account 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. The remaining balance of the petty cash account was $150. Total expenses incurred using the petty Feb 25 Feb 28 Feb 28 Feb 28 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. 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. Complete parts b), c) and d) & e), including adjustments, on the worksheet now. Adjustments: Feb 28 Feb 28 Feb 28 For Prepaid Insurance, record the adjustment of $440 for the current month expense. For Unearned Revenue, $2,700 still remains unearned at the end of February. Monthly depreciation on the equipment was $1,500, Journalize and then post adjustments General Journal Date Account Title and Explanation PR DR 2021 Page 3 CR 11336516/View df 6/22 82 General Journal 6 D Page 4 55 00 3: 7 &7 16 2 8: 0 84 6 88> 8 10 70 View 7/22 - 82% General Journal Adjusting Entries Date Account Title and Explanation PR DR CR Page 5 11336516/View 8/22 82% General Ledger Accounts Account Date Cash Description Account Date Petty Cash Opening Bulares DE OF PE DR CR GL 101 Balance (DR or CR) 105 GL No Balance (OR or C Account Accounts Rece GL Date PE D Accoun Date 35 0.00 Merchandi 120 P CR 32 16 7 28 100 47. 8= B 16 8: DO 01 61 8 9 ent/11336516/View t.pdf 9/22 82% Account Date Prepaid insurance Description Opening Salance Aunt Equipment Date Description Account Date Opening ti PE OF CR PE CR " OR Accumulated Depreciation Description Opening Balance Account Date Description P CR % 85 GLN 125 Balance (DR or C) 140 GL NO Balance (DR or C 145 GL Balance (O or C GLN 200 Balance (Dar C Accoun Date GL 205 " CR GLN 330 Date P DR Desig 34 6O 225 P OR of 8 = 88 & 7 8 DIL D TO 80 ( 9 0 nt/11336516/View pdf 10/22 Account Date 82% Income Tax Payable Description Opening Balance PR O B Account Date Salaries Payable Description CR Account Date Uneamed Revenue Description Opening Balance GL No 230 Balance (DR or CR 0000 C 335 GL Ne Balance (DR or C 240 Balance (DR or GL N " CR 245 Balance (or CRI GLM Date Description OR DE Account Account Date Common Sha Description P Opening Account Date 95 GL No 300 305 2 ON OR Sales Recetur Descr ON CR s 6 & 17 80 8 400 ale Or Cll 29 8 19 O ewContent/11336516/View 2 Student.pdf 11/22 82% 2 24 Account Date Account Date Sales Retams and Allowances Description PO CR Interest Reven N GL Ne 410 Balance (DR or C) GL No 430 Balance (0 or C 500 Balance (OR or C Cost of Goods Sold GLN Dale 2 O DR Date 85 Date Dearty Account Dale P M 510 GLNe Balance (or C 515 120 OF 321 Date P 20 OR Date 90 2 G 31 76 96 OF Balance 100 8 = DIE TR & 28 7 W 8 11 8 Account: Date Rent Expense Description Account: Date Salaries Expense Description PR DR CR PR DR CR Account: Bank Charges Expense Date Description PR DR CR 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 GL No: 535 Balance (DR or CR) GL No: 540 Balance (DR or CR) 545 GL No: Balance (DR or CR) 555 GL No: Balance (DR or CR) GL No: 560 Balance (DR or CR) GL No: 565 Balance (DR or CR) Use this chart to keep track of inventory values Date Jan 31 Purchases Sales Balance Quantity Unit Cost Value Quantity Unit Cost Value Quantity Unit Cost Value 500 25.00 12,500.00 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. Bank of Canada Prepared for Tees R Us Date Information Withdrawal Deposit Balance Opening Balance 24,300.00 Feb 1 Paid Chq#3355 500.00 23,800.00 Feb 8 Deposit 11,300.00 35,100.00 Feb 14 Paid Chq#3356 28,089.60 7,010.40 Feb 15 Paid Chq#3357 9,127.00 -2,116.60 Feb 17 Deposit 58,200.00 56,083.40 Feb 18 Chq#3358 42,000.00 14,083.40 Feb 19 Chq#11140 3,390.00 10,693.40 Feb 25 Chq#3359 350.00 10,343.40 Feb 28 Auto debit loan payment 1,076.00 9,267.40 Feb 28 Service Charge 34.00 9,233.40 Feb 28 Interest 290.00 9,523.40 General Ledger Accounts Account: Cash GL No: 101 Date Description PR DR CR Balance (DR or CR) Opening Balance 35,600.00 DR Feb 1 Paid Chq#3354 G13 Feb 1 Paid Cha#3355 G13 Feb 12 |Pald Cho:3356 G13 Feb 15 Paid Chq#3357 G13 660.00 500.00 28,089.60 9,127.00 34,940.00 DR 34,440.00 DR 6,350.40 DR 2,776.60 CR Feb 17 Received payment GJ3 58,200.00 55,423.40 DR Feb 18 Paid inventory Chq#3358 GJ3 42,000.00 13,423.40 DR Feb 20 Received payment GJ3 3,200.00 16,623.40 DR Feb 25 Petty Cash Chq#3359 GJ3 Feb 281 Paid loan GJ3 350.00 1,076.00 16,273.40 DR 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 (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 ladear to bring the Explanation Balance per records Tees R Us Bank Reconciliation Statement February 28, 2021 Balance per Balance per books Bank Account Titles Cash Petty Cash Accounts Receivable Merchandise Inventory Prepaid Insurance Equipment Accumulated Depreciatio Accounts Payable CPP Payable El Payable Income Tax Payable Salaries Payable Unearned Revenue Bank Loan Common Shares Retained Earnings Sales Revenue Sales Discounts Interest Revenue Cost of Goods Sold Employee Benefits Expen Depreciation Expense insurance Expense interest Expense Office Supplies Expense Rent Expense Unadjusted Trial Balance: DR CR Tees R Us Worksheet February 28, 2021 Adjustments Adjusted Trial Balance Income Statement DR CR DR CR DR CR DR Balance Sheet CR Salaries Expense Bank Charges Expense Shipping Expense Cash Over and Short Total Net Income Tees R Us Classified Balance Sheet As at January 31, 2021 Assets Cash Accounts Receivable $35,600 $16,870 Merchandise Inventory Prepaid Insurance $12,500 $4,400 Total Current Assets 69,370 Long-Term Assets Equipment 162,000 Accumulated Depreciation -52,000 110,000 Total Assets $179,370 Liabilities Current Liabilities Accounts Payable Unearned Revenue Salaries Payable Current Portion of Bank Loan Total Current Liabilities Non-Current Liabilities $12,000 $9,000 $5,700 $11,160 $37,860 23,840 $61,700 Non-Current Portion of Bank Loan Total Liabilities 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 Cash Over & Short Total Operating Expenses Operating Income 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 /View 20/22 82% 3) Prepare a classified balance sheet. Assume that 5 of the bank loan will be paid off in the 12 months Assets Current Assets Ch Petty Cash Accounts Receivable Merchandise Inventory Prepaid Insurance Total Current Assets Long-Term Assets Equipment Tees Us Balance Sheet As at February 28, 2021 Accumulated Depreciation Total Assets Labiles Current Liebilses Che Payable Income Tax Payable Salaries Payable Uneamed Revenue Current Partion of Bank Loan Total Current Liab Non Current Partion of Bank Lean Shareholders Equity Comman Shares Retained faming Total Liabilities & Shareholder que Based on the information above, answer the following questions. a) Calculate the current ratio as at February 28, 2021 Current Assets/Current Liabilities 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. Gross Profit/Net Sales g) Last month, the gross profit margin percentage was 70%. What could have caused this decrease in gross margin percentage? Change in product mix. Some products sold could have higher gross profit margin than others Theft of inventory Errors in calculating COGS Perhaps they need to increase sales price to compensate for increase in product costs from suppliers 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? They are holding on to inventory for less time as they are turning it over, buying and selling it faster