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The following information relates to Paris Cosmetics. Ltd. for the year 2017 (1/1/2017). Cash…………………………………….       €1,686 Short...

The following information relates to Paris Cosmetics. Ltd. for the year 2017 (1/1/2017).

Cash…………………………………….       €1,686

Short term investments………………...        1,277

Accounts Payable……………………….      7,840

Accounts Receivable……………………      2,670

Inventory……………………………….       5,638

Intangible Assets……………………….       2,694            

Current borrowings……………………..          500

Non-current borrowings………………...      1,683

Property Plant and Equipment…………        23,316

Share Capital-Ordinary…………………      24,594

Retained Earnings………………………       ?

Instructions: Prepare the journal entries for each of the transactions.

Paid mortgages of €686, €252 of which was interest and the remainder of which was repayment of principal.(Hint: think about what kind of borrowing you are paying off. Next year, Paris Cosmetics expects to pay off another €356 in mortgage principal (you need to transfer this amount from Non-current borrowings to current borrowings).

  1. Spent €872 in advertising costs, 372 on account and the remainder paid in cash.
  2. Received €420 for make-overs and make-up jobs at Paris Fashion week. €410 has been received in cash and the remainder is on account.
  3. Paid €32 in health insurance benefits for employees (Insurance Expenses).
  4. Bought €10,800 in ingredients to make cosmetics on account (Ingredients Expense)
  5. Sold €15,486 in cosmetics, of which €10,236 has been collected. The rest is on account.
  6. Paid €9,238 to various suppliers of ingredients for cosmetics to cover accounts payable.
  7. Paid €2,400 in wages.
  8. Paid $500 in utilities.
  9. Declared and paid a cash dividend of €900.
  10. Used €10,200 in ingredients.
  11. Received €6900 in payments from customers as payment on account.

     Adjust the accounts using the beginning balances.

  1. Prepare the income statement for 12/31/2017. Remember to calculate cost of goods sold and gross profit as well as net income.Assume all expenses are part of COGS.
  2. Construct a Statement of Financial Position for Paris Cosmetics (order is very important) for 12/31/2017.
  3. Calculate Expenses as % of Sales, Current Ratio, Quick Ratio, Net Working Capital, ROE, Debt-to-Equity .

Accounts used: Cash, Short term Investments, Accounts Payable, Accounts Receivable, Inventory, Current Borrowings, Non-current borrowings, Property plant and Equipment, Share Capital- Ordinary, Retained Earnings, Interest expense, Advertising expense, Insurance expense, Sales Revenue, Wages expense, Utilities expense, Ingredient expense

Account

DR

CR

  1. Paying mortgage payment
  1. Transferring debt from long-term to short-term
  1. Buying Advertising
  1. Sales at Fashion week
  1. Paying for insurance
  1. Buying inventory
  1. Retail Sales
  1. Paying Accounts Payable
  1. Paying wages

  1. Paying Utility bill
  1. Paying a dividend

  1. Using Inventory
  1. Customers paying on their accounts

Paris Cosmetics

Income Statement

for the year 2017

Revenues

Cost of Goods sold (includes 6 types of expenses)

Gross Profit

Net income

Paris Cosmetics

Statement of Financial Position

At December 31, 2017

Assets (list both current and non-current)

Equity

Liabilities (list both current and non-current)

Expenses as % of sales

Current Ratio

Quick ratio

Net Working Capital

ROE

Debt- to- Equity

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