Question

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.

13. 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.
14. Construct a Statement of Financial Position for Paris Cosmetics (order is very important) for 12/31/2017.
15. Calculate Expenses as % of Sales, Current Ratio, Quick Ratio, Net Working Capital, ROE, Debt-to-Equity .

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

Answer 1

Solution:-

Paris cosmetics pvt.ltd

The data for journal entries are:-

Particulars	debit	credit
current borrowings a/c dr. interest a/c dr. to cash a/c (being payment of mortgage)	450 352	786
non-current borrowings a/c dr. to current borrowings a/c (being mortgage payment to made in next year is transferred to current borrowings)	856	486
Advertisement expense a/c dr	354	584
cash a/c	580	580
insurance ecpense a/c dr	52	52