Question

Question 1:
The Zemax Corporation had the following selected transactions in the month of May. The company adjusts its accounts monthly.
1. The company has a 4%, $16,000 note payable due in one year. Interest payable the first of each month. It was last paid on May 1, and will be paid next on June 1.
2. At the end of May, the company earned $700 interest in investments. The bank deposited this amount in Zemax’s bank account on June 1.
3. Zemax has six employees who each earn $175 a day. Salaries are normally paid on Fridays for work completed Monday through Friday of the same week. Salaries were last paid on Friday May 27, and will be paid next on Friday June 3.
4. At the end of May, the company owed the utility company $650 and the telephone company $400 for services received during the month. These bills were paid on June 11.
5. At the end of May, Zemax has earned $5,000 that it has not yet billed. It bills its clients for fees earned on June 1. On June 30, it collects $3,500 of this amount due.

Required:
a. For each of the above situations, prepare the monthly adjusting journal entry required at May 31.
b. Prepare any subsequent transaction entries that occur in the month of June.


Question 2:
Selected financial information of Lucky Luke Inc. is presented below:

2014
2013
Cash
55,000
40,500
Accounts Receivable
25,000
15,000
Inventory
15,000
20,000
Prepaid Insurance
5,000
5,000
Building
350,000
350,000
Accumulated Depreciation – Building
175,000
166,250
Accounts Payable
40,000
35,000
Mortgage Payable
100,000
115,000
Common Shares
20,000
20,000
Net Sales
105,250
90,700
Cost of Goods Sold
55,550
41,450
Interest Expense
5,000
5,500
Income Tax Expense
8,300
8,200
Profit (loss)
36,400
35,550

Required:
1. Calculate the following for 2014 and 2013:

i. Current ratio
ii. Gross Profit Margin
iii. Profit Margin
iv. Debt to Total Assets
v. Times Interest Earned

2. Calculate the following for 2014

i. Accounts Receivable Turnover
ii. Inventory Turnover


Question 3:
The income statement for Snowshoe Inc., a publicly traded company following IFRS, is presented here:
Snowshoe Inc.
Income Statement
Year Ended December 31, 2014

Sales​​​​$6,500,000
Cost of Goods Sold​​$3,750,000
Gross Profit​​​$2,750,000
Operating Expenses​​$1,100,000
Profit from Operations​​$1,650,000
Interest Expense​​   $100,000
Profit before Income Taxes​$1,550,000
Income Taxes​​​    $620,000
Profit​​​​    $930,000

Additional Information:
1. Operating expenses include $45,000 of depreciation expense and a $95,000 impairment loss on property, plant and equipment.
2. Accounts Receivable decreased by $105,000
3. Merchandise Inventory increased by $65,000
4. Prepaid expenses related to operating expenses increased by $45,000
5. Accounts Payable to suppliers of merchandise decreased by $115,000
6. Accrued liabilities related to operating expenses increased by $45,000
7. Interest Payable decreased by $30,000
8. Income tax payable decreased by $35,000

Required:
Prepare the operating activities section of the statement of cash flows using the direct Method (no marks will be awarded if the Indirect Method is used)

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