The following information was taken from the accounting records of Chicoutimi Ltée. and Jonquière Ltée. at December 31, 2020. The two companies are competitors. Chicoutimi Ltée Jonquière Ltée Ending inventory, Dec. 31, 2019 $411,000 $155,000 Ending inventory, Dec. 31, 2020 419,000 216,000 Cost of goods sold, 2020 3,361,500 1,131,550 Sales for 2020 6,723,000 2,263,100 Calculate the gross margin, gross margin ratio, and inventory turnover ratio at December 31, 2020, for: i. Chicoutimi Ltée. ii. Jonquière Ltée. (Round inventory turnover ratio to 1 decimal place, e.g. 10.1.) Chicoutimi Ltée Jonquière Ltée Gross margin $ $ Gross margin ratio % % Inventory turnover ratio times times During the December 20, 2020, inventory count at Chicoutimi Ltée., $72,000 of inventory shrinkage was identified. It had not been recorded in the inventory account. i. Prepare the entry to record the inventory shrinkage of $72,000. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account and explanation Debit Credit ii. Recalculate Chicoutimi’s gross margin, gross margin ratio, and inventory turnover ratio after the adjusting journal entry is made. (Hint: You need to adjust the ending inventory balance for 2020 and the cost of goods sold.) (Round gross margin ratio to 1 decimal place, e.g. 10.5% and inventory turnover ratio to 1 decimal place, e.g. 8.5.) Chicoutimi Ltée Gross margin $ Gross margin ratio % Inventory turnover ratio times
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
| Chicoutimi Ltée | Jonquière Ltée | |||
| Ending inventory, Dec. 31, 2019 | $411,000 | $155,000 | ||
| Ending inventory, Dec. 31, 2020 | 419,000 | 216,000 | ||
| Cost of goods sold, 2020 | 3,361,500 | 1,131,550 | ||
| Sales for 2020 | 6,723,000 | 2,263,100 |
i. Chicoutimi Ltée.
ii. Jonquière Ltée.
(Round inventory turnover ratio to 1 decimal place, e.g. 10.1.)
| Chicoutimi Ltée | Jonquière Ltée | |||||
| Gross margin | $ | $ | ||||
| Gross margin ratio | % | % | ||||
| Inventory turnover ratio | times | times |
During the December 20, 2020, inventory count at Chicoutimi Ltée., $72,000 of inventory shrinkage was identified. It had not been recorded in the inventory account.
i. Prepare the entry to record the inventory shrinkage of $72,000. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
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Account and explanation
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Credit
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ii. Recalculate Chicoutimi’s gross margin, gross margin ratio, and inventory turnover ratio after the
| Chicoutimi Ltée | |||
| Gross margin | $ | ||
| Gross margin ratio | % | ||
| Inventory turnover ratio | times |
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