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.

1. 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).
2. Spent €872 in advertising costs, 372 on account and the remainder paid in cash.
3. 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.
4. Paid €32 in health insurance benefits for employees (Insurance Expenses).
5. Bought €10,800 in ingredients to make cosmetics on account (Ingredients Expense)
6. Sold €15,486 in cosmetics, of which €10,236 has been collected. The rest is on account.
7. Paid €9,238 to various suppliers of ingredients for cosmetics to cover accounts payable.
8. Paid €2,400 in wages.
9. Paid $500 in utilities.
10. Declared and paid a cash dividend of €900.
11. Used €10,200 in ingredients.
12. 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.

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
Paying mortgage payment
Transferring debt from long-term to short-term
Buying Advertising
Sales at Fashion week
Paying for insurance
Buying inventory
Retail Sales
Paying Accounts Payable
Paying wages
Paying Utility bill
Paying a dividend
Using Inventory
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

Answer 1

Answer:

Paris Cosmetics Pvt. Ltd.( for the year 2017
1) Journal Entries
Sr no.	Particulars	Dr.(€)	Cr. (€)
1	Current Borrowings A/c	434
	Interest A/c	252
	Cash A/c		686
	( Being payment of mortgage )
2	Non-Current Borrowings A/c	356
	Current Borrowings A/c		356
	( Being mortgage payment To made in next year is transferredTo current borrowings)
3	Advertisement Expense A/c	872
	Cash A/c		500
	Account Payable A/c		372
	( Being Advertisement expenses incurred)
4	Cash A/c	410
	Account Receivable A/c	10
	Sales A/c		420
	( Being sales revenue from fashion week recorded)
5	Insurance expense A/c	32
	Cash A/c		32
	( Being Insurance expense on the life of the employees paid)
6	Inventory A/c	10,800
	Cash A/c		10,800
	( Being Inventory purchased)
7	Cash A/c	10,236
	Account Receivable A/c	5,250
	Sales A/c		15,486
	( Being sales revenue form sales of cosmetics)
8	Account payable A/c	9,238
	Cash A/c		9,238
	( Being payment to suppliers of Cosmetics)
	Wages A/c	2,400
9	Cash A/c		2,400
	( Being Wages paid to the employees)
	Utilities Expense A/c	500
10	Cash A/c		500
	(being utilities expense paid)
11	Dividend A/c	900
	Cash A/c		900
	( Being dividend declared and paid)
12	Inventory A/c	10,200
	Ingredient expense  A/c		10,200
	( Being inventory used in manufacturing of goods)
13	Cash A/c	6,900
	Account Receivable A/c		6,900
	( Being amount received form customers)
	Retained Earnings A/c	900
14	Dividend A/c		900
	(Being Dividend Declare)

2) Adjusting Ledger
Cash					Advertisement Expense
Particulars	Debit (€)	Particulars	Credit (€)		Particulars	Debit (€)	Particulars	Credit (€)
Opening Bal.	1,686	Current Borrowings	434		Cash	500	Profit and Loss A/c	872
Sales	410	Interest	252		Account Payables	372
Sales	10,236	Advertisement Expense	500			872		872
Account Receivables	6,900	Insurance Expense	32
		Account Payables	9,238		Retained Earnings
		Wages	2,400		Particulars	Debit (€)	Particulars	Credit (€)
		Utilities expense	500		Closing Bal.	3,414	Opening Bal.	2,664
		Dividend	900				Income	750
		Closing Bal.	4,976
						3,414		3,414
	19,232		19,232
Wages					Non-Current Borrowings
Particulars	Debit (€)	Particulars	Credit (€)		Particulars	Debit (€)	Particulars	Credit (€)
Cash	2,400	Profit and Loss A/c	2,400		Current Borrowings	356	Opening Bal.	1,683
					Closing Bal.	1,327
	2,400		2,400
						1,683		1,683
Account Payables
Particulars	Debit (€)	Particulars	Credit (€)		Interest
Cash	9,238	Opening Bal.	7,840		Particulars	Debit (€)	Particulars	Credit (€)
Closing Bal.	9,774	Advertisement Expense	372		Cash	252	Profit and Loss A/c	252
		Inventory	10,800
						252		252
	19,012		19,012
Ingredient Expense					Inventory
Particulars	Debit (€)	Particulars	Credit (€)		Particulars	Debit (€)	Particulars	Credit (€)
Inventory	10,200	Profit and Loss A/c	10,200		Opening Bal.	5,638	Ingredient Expense	10,200
					Account Payables	10,800	Closing Bal.	6,238
	10,200		10,200
						16,438		16,438
Account Receivables					Utilities expense
Particulars	Debit (€)	Particulars	Credit (€)		Particulars	Debit (€)	Particulars	Credit (€)
Opening Bal.	2,670	Cash	6,900		Cash	500	Profit and Loss A/c	500
Sales	10	Closing Bal.	1,030
Sales	5,250					500		500
					Insurance Expense
	7,930		7,930		Particulars	Debit (€)	Particulars	Credit (€)
Current Borrowings					Cash	32	Profit and Loss A/c	32
Particulars	Debit (€)	Particulars	Credit (€)
Cash	434	Opening Bal.	500			32		32
Closing Bal.	422	Non-Current Borrowings	356		Dividend
					Particulars	Debit (€)	Particulars	Credit (€)
	856		856		Cash	900	Retained Earnings	900
Sales
Particulars	Debit (€)	Particulars	Credit (€)			900		900
Profit and Loss A/c	15,906	Cash	410
		Account Receivables	10
		Cash	10,236
		Account Receivables	5,250
	15,906		15,906

Opening Retained Earnings
Particulars	Amount (€)	Amount (€)
Cash	1,686
Account Receivables	2,670
Short Term Investment	1,277
Intangible Assets	2,694
Inventory	5,638
Property, Plant & Equipment	23,316	37,281
Current Borrowings	500
Account Payables	7,840
Non-Current Borrowings	1,683
Share capital Ordinary	24,594	34,617
Retained Earning		2,664

3.Income Statement Profit & loss A/c
Particulars		Amount (€)
Sales		15,906
Less:Cost of goods Sold
Ingredient Expense	10,200
Wages	2,400
Interest	252
Advertisement Exps	872
Insurance Exps	32
Utilities expense	500
		14,256
Gross Profit		1,650
Dividend Exps		900
Net Income		750

Fianancial Statement
	Amount (€)	Amount (€)
Equity and Liability
Equity share capital		24,594
Retained Earnings		3,414
Non-Current Borrowings		1,327
Current Liabilities:
Current Borrowings		422
Account Payables		9,774
Total		39,531
Assets
Fixed Assets
Intangible Assets	2,694
Property, Plant & Equipment	23,316
		26,010
Current Assets
Short Term Investment	1,277
Cash	4,976
Inventory	6,238
Account Receivables	1,030
		13,521
Total		39,531