Chloe Mendez owns a clothing company, Chloe's Closet. She has a team of tailors who work for 8 hours every day from Monday to Saturday. Demand for her business is strong but there seems to be something preventing her from meeting the demands of her customers. Chloe sells to both big department stores and small boutique stores under the brand Chloe's Closet. Some brands also ask her to manufacture their own designs. Business for Chloe has been good since it started last 2014. In fact, despite the tough competition from cheaper manufacturers abroad, she still manages to grow her customer base. On December 4, 2015 Chloe received a billing statement from a raw material supplier for an amount of PHP400,000 which will be due in 5 days. She is also scheduled to pay her employees' monthly salary of PHP70,000 the following day. Upon checking her bank account, she only has a PHP67,000 balance. She knew she had exceeded her sales target last October and November so she is wondering why she only has this amount of cash in her bank account. Was her money stolen? Being a CPA, she checked the bank statement and her financial records and found no mistakes. Here is the latest financial statement of Chloe's Closet as of November 30, 2015: Statement of Financial Position Nov 30, 2015 Dec 31, 2014 60,000.00 270,000.00 Cash 740,000.00 500,000.00 Accounts Receivable 600,000.00 400,000.00 Inventory 800,000.00 850,000.00 Machinery 2,200,000.00 2,020,000.00 TOTAL ASSETS

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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QUESTION: WHAT’S WRONG WITH CHLOE’S CLOSET?
Accounts Payable
400,000.00
500,000.00
EROS
Salaries Payable
150,000.00
150,000.00
Total Liabilities
400,000.00
500,000.00
Capital Stock
200,000.00
200,000.00
Accumulated Profit
1,600,000.00
1,320,000.00
Total Equity
1,800,000.00
1,520,000.00
TOTAL EQUITY AND LIABILITIES
2,200,000.00
2,020,000.00
Statement of Financia! Position
Nov 30, 2015
Dec 31, 2014
Sales
800,000.00
600,000.00
Cost of Goods Sold
300,000.00
225,000.00
Operating Expenses
100,000.00
105,000.00
Operating Income
400,000.00
270,000.00
Machinery
120,000.00
81,000.00
NET INCOME
280,000.00
189,000.00
What's wrong with Chloe's Closet?
Transcribed Image Text:Accounts Payable 400,000.00 500,000.00 EROS Salaries Payable 150,000.00 150,000.00 Total Liabilities 400,000.00 500,000.00 Capital Stock 200,000.00 200,000.00 Accumulated Profit 1,600,000.00 1,320,000.00 Total Equity 1,800,000.00 1,520,000.00 TOTAL EQUITY AND LIABILITIES 2,200,000.00 2,020,000.00 Statement of Financia! Position Nov 30, 2015 Dec 31, 2014 Sales 800,000.00 600,000.00 Cost of Goods Sold 300,000.00 225,000.00 Operating Expenses 100,000.00 105,000.00 Operating Income 400,000.00 270,000.00 Machinery 120,000.00 81,000.00 NET INCOME 280,000.00 189,000.00 What's wrong with Chloe's Closet?
Chloe's Closet
Chloe Mendez owns a clothing comparny, Chloe's Closet. She has a team of tailors who
work for 8 hours every day from Monday to Saturday. Demand for her business is strong but
there seems to be something preventing her from meeting the demands of her customers.
Chloe sells to both big department stores and small boutique stores under the brand
Chloe's Closet. Some brands also ask her to manufacture their own designs. Business for Chloe
has been good since it started last 2014. In fact, despite the tough competition from cheaper
manufacturers abroad, she still manages to grow her customer base.
On December 4, 2015 Chloe received a billing statement from a raw material supplier for
an amount of PHP400,000 which will be due in 5 days. She is also scheduled to pay her
employees' monthly salary of PHP70,000 the following day. Upon checking her bank account,
she only has a PHP67,000 balance. She knew she had exceeded her sales target last October and
November so she is wondering why she only has this amount of cash in her bank account. Was
her money stolen? Being a CPA, she checked the bank statement and her financial records and
found no mistakes.
Here is the latest financial statement of Chloe's Closet as of November 30, 2015:
Statement of Financial Position
Nov 30, 2015
Dec 31, 2014
60,000.00
270,000.00
Cash
740,000.00
500,000.00
Accounts Receivable
600,000.00
400,000.00
Inventory
800,000.00
850,000.00
Machinery
2,200,000.00
2,020,000.00
TOTAL ASSETS
Transcribed Image Text:Chloe's Closet Chloe Mendez owns a clothing comparny, Chloe's Closet. She has a team of tailors who work for 8 hours every day from Monday to Saturday. Demand for her business is strong but there seems to be something preventing her from meeting the demands of her customers. Chloe sells to both big department stores and small boutique stores under the brand Chloe's Closet. Some brands also ask her to manufacture their own designs. Business for Chloe has been good since it started last 2014. In fact, despite the tough competition from cheaper manufacturers abroad, she still manages to grow her customer base. On December 4, 2015 Chloe received a billing statement from a raw material supplier for an amount of PHP400,000 which will be due in 5 days. She is also scheduled to pay her employees' monthly salary of PHP70,000 the following day. Upon checking her bank account, she only has a PHP67,000 balance. She knew she had exceeded her sales target last October and November so she is wondering why she only has this amount of cash in her bank account. Was her money stolen? Being a CPA, she checked the bank statement and her financial records and found no mistakes. Here is the latest financial statement of Chloe's Closet as of November 30, 2015: Statement of Financial Position Nov 30, 2015 Dec 31, 2014 60,000.00 270,000.00 Cash 740,000.00 500,000.00 Accounts Receivable 600,000.00 400,000.00 Inventory 800,000.00 850,000.00 Machinery 2,200,000.00 2,020,000.00 TOTAL ASSETS
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