Question

1. The following data is available for Tommy's Toys for the years 2008 through 2011 (10 points) 201e S7646 $7. Cot of pood wd Accots payabl A Calcalate the orats payalde t ratie fir the fieming yoars STAIS SLO23 SLA22 2 2010 B Calcelate the ahar ef days it is tuking Tony's Toys to pay their vendors (nea 65 day yew 2011 200 3. 2009 C. Eplhin uhether Tomny's Toys is ding a bener jeb of pasing their vende in a timely manner. 2. Complete the following balance sheet by entering the appropriate amounts in the blanks provided. (10 points) ASSETS Cah Accounts roccivale Ruilding Aecmlated dprocistion Total Asets LIABILITIES Acorunts Payale Notes payable, hort-term lacome tases payab Total current liahilitie Mortgage payable Total Lalities SIS00 (B) 35,000 I1.000 120 25.000 STOCKHOLDERS EQUITY Contrilted capital 21 15.000 Retained caraing Total Stoclden Equity Total Liabilities and Sockedders Equity Part III. Comprehensive Questions (15*2-30') Davis Consulting is both doing consulting service and selling accounting software and uses the perpetual inventory system to account for software inventory. During January, Davis Consulting completed the following transactions: Jan. 1 Issued 10,000 of shares with the par value of $5, received S100,000. 2 Completed a consulting engagement and received cash of $7,800. 2 Prepaid three months office rent, $1,650. 7 Purchased 80 units software inventory on account, $1,680, plus freight in, $80. (S/15, EOM) 18 Sold 40 software units on account, S3,500 (cost $880). (3/10, n/30) 19 Borrow 5,000 of cash from a bank. 20 Paid employee salaries, $2,055, which includes accrued salaries from December of 1,000. 21 Paid on account, $1,760. 22 Received full payment of the sale on Jan. 18. 24 Paid utilities, $250. 25 Paid for half of the inventory bought in Jan. 7. 28 Bought 1,000 shares of stock back and paid for 7,000. (cost method) 31 Recorded the following adjusting entries: a. Accrued salaries expense, S686 b. depreciation, S100 (equipment, $30; Furniture, $70) c. expiration of prepaid rent, $550

Answer 1

Davis Consulting Journal Enteries Date Particulars Jan-01 Cash a/c Dr. To Common Stock To Paid in Capital in excess of par (Common Stock issued) Debit in $ Credit in 100000 50000 50000 Jan-02 7800 Cash a/c Dr. To Consulting Revenue (Revenue earned in cash) 7800 1650 Jan-02 Prepaid Rent a/c Dr. To Cash (3 months rent in advance) 1650 Jan-07 1680 Inventory a/c Dr. To Accounts Payable (Inventory on account) 1680 Dr. Freight in a/c To Cash (Freight paid) 80 Jan-18 Dr. 3500 Accounts Receivable a/c To Sales (Sales on account) 3500 880 Cost of goods sold a/c Dr. To Inventory (To record cost of goods sold) 880 5000 Jan-19 Cash a/c Dr. To Bank Loan (Cash borrowed from Bank) 5000 1000 1055 Dr. Jan-20 Salary Payable a/c Salary Expense a/c To Cash (Salary paid) 2055 Dr. 1760 Jan-21 Accounts Payable a/c To Cash (Creditors paid) 1760

Date Jan-22 Particulars Cash a/c Dr. Sales Discount a/c Dr. To Accounts Receivable (Cash from debtors) 3500 x 3% = 105 Debit in $ Credit in 3395 105 3500 Jan-24 Dr. 250 Utilities Expense a/c To Cash (Utilities paid) 250 Jan-25 840 Accounts Payable a/c Dr. To Cash (Creditors paid) 1680 / 2 = 840 840 Jan-28 Dr. 7000 Treasury Stock a/c To Cash (Bought own shares) 7000 Adjusting Enteries Date Particulars Jan-31 Salary Expense a/c To Salary Payable (Salary accrued) Dr. Debit in $ Credit in 686 686 100 Jan-31 Depreciation Expense a/c Dr. To Accum Depre - Equip. To Accum Depre - Furn. (To record depreciation) Dr. 550 Jan-31 Rent Expense a/c To Prepaid Rent (Rent expensed) 550

Tommy's Toys Requirement A Accounts Payable Turnover = Cost of goods sold / Avg. Accounts Payable 1.2011 = 7506/(1023 +1022)/2 = 7506 / 1022.5 = 7.34 2.2010 = 7646 / ( 1022 +878)/2 = 7646 / 950 = 8.05 3.2009 = 7799 / ( 878+896)/2 = 7799 / 887 = 8.79 Requirement B Accounts Payable Days = 365 / Accounts Payable Turnover 1.2011 = 365 / 7.34 = 49.73 Days 2.2010 = 365 / 8.05 = 45.34 Days 3.2009 = 365 / 8.79 = 41.52 Days Requirement B Tommy's Toys Credit Period has increased thereby increasing Cash flow.

Complete Balance Sheet As at... Assets Cash Accounts Receivable Building Accum. Depreciation Total Assets 15000 40000 60000 25000 35000 90000 Liabilities Accounts Payable Note Payable short term Income Taxes Payable Total Current Liabilities Mortgage Payable Total Liabilities 11000 12000 2000 25000 25000 50000 Stockholders Equity Contributed Capital Retained Earnings Total Stockholders Equity Total Liabilities & Stockholders Equity 25000 15000 40000 90000 (A) 90000 - 35000 - 15000 = 40000 (B) 60000 - 35000 = 25000 (C) Same as Total Liabilities & Stockholders Equity (D) 25000 - 12000 - 11000 = 2000 (E) 25000 + 15000 = 40000