Sorry this is long Background: Harriet’s Hats is a hat retailer (in other words,
ID: 2487468 • Letter: S
Question
Sorry this is long
Background: Harriet’s Hats is a hat retailer (in other words, Harriet’s buys hats from a hat manufacturer and then sells them in their stores). Transactions for 2014 are representative of such a company’s business activities. HINT: Read through the entire assignment at least twice before beginning to do any work. This will help you familiarize yourself with all of the important facts.
Harriet's Hats
Balance Sheet
For the Year Ended December 31, 2013
Assets
Cash
$ 45,000
Accounts Receivable
45,000
Less: Allowance for Doubtful Accounts
(4,500)
Net Accounts Receivable
40,500
Prepaid Rent
21,000
Inventory
70,000
Total Current Assets
$ 176,500
Property, Plant, and Equipment
87,000
Less: Accumulated Depreciation
(52,200)
Net Property, Plant, and Equipment
34,800
Total Assets
$ 211,300
Liabilities and Owner’s Equity
Accounts Payable
$ 5,000
Wages Payable
4,000
Interest Payable
1,000
Income Taxes Payable
5,000
Notes Payable
50,000
Total Current Liabilities
$ 65,000
Common Stock (15,000 shares outstanding, $1 par)
15,000
Additional Paid In Capital
25,000
Retained Earnings
106,300
Total Liabilities and Owner’s Equity
$ 211,300
Transactions for 2014:
1. Sales and Accounts Receivable
Harriet’s hats during 2014 had a sales price of $58 per hat. All sales were made on account.
Cash collections on account amounted to $250,000.
On July 1, 2014, Harriet’s identified $9,350 of receivables as being uncollectible and wrote them off.
Harriet’s follows a percentage-of-receivables approach to estimate their accounts receivable that will become uncollectible. As of the end of 2013, Harriet’s estimates that 10% of their receivables will be uncollectible.
2. Inventory
a. Harriet’s began 2014 with 2,000 hats which had a cost of $35 each. Employees physically counted 500 hats remaining in the warehouse at the end of 2014. Harriet’s uses a periodic LIFO inventory system to cost their inventory. The following purchases (all on account) were made during 2014:
January 15th – 750 hats @ $36.00 each
March 22nd – 1,000 hats @ $38.00 each
August 5th – 1,250 hats @ $39.00 each
October 26th – 1,500 hats @ $40.00 each
b. During 2014, Harriet’s made cash payments to inventory suppliers on the following dates:
January 29th – $21,600
April 16th – $45,600
October 2nd – $48,750
November 30th – $36,000
3. Property, Plant and Equipment
Harriet’s uses straight-line depreciation for all of its store fixtures and office equipment.
Below is a schedule of the store fixtures and office equipment Harriet’s had in place at the end of 2013.
FIXTURES AND EQUIPMENT (as of December 31, 2013)
ID #
Historical
Cost
Estimated
Useful Life
Estimated
Salvage Value
Date acquired
1256
$36,000
10 years
$0
Jan. 1,
2007
1876
$20,000
6 years
$2,000
Jan. 1,
2009
4299
$31,000
8 years
$7,000
Jan. 1,
2010
On January 1, 2014 new store fixtures were purchased for $20,000 in cash. Harriet’s expects the fixtures to have a 10 year useful life and a $4,000 salvage value.
On April 1, 2014 office equipment (ID#1876) was sold for $5,000.
4. Debt
On November 1, 2014, Harriet’s paid-off the note payable that was outstanding at the beginning of the period. The note had a 12% interest rate, had been issued on November 1, 2013, and required semiannual interest payments on April 30, 2014 and October 31, 2014.
On December 1, 2014, Harriet’s borrowed $62,000 on a new note payable. The new note carries a 9% interest rate with semiannual interest payments required on May 31, 2015 and November 30, 2015.
5. Operations
Harriet’s made a rent payment of $48,000 on August 1, 2014. The payment was for rent on the store building and was prepaid for one year. The balance in the prepaid account at the end of 2013 represents the rent for January through July 31, 2014 that was paid for on August 1, 2013.
Cash paid out during 2014 for wages totaled $32,000. Records indicate that salaries for the last week of December 2014 amounted to $1,500 and would be paid at the end of the first week in January 2015 (a two-week pay period).
Other expenses (paid in cash) totaled $6,500.
6. Income Taxes
a. On March 15, 2014, Harriet’s paid their 2013 income taxes. Harriet’s will pay their 2014 income taxes on March 15, 2015. Harriet’s has a 30% income tax rate for both 2013 and 2014.
7. Common Stock
On December 1, 2014, dividends of $8,000 were declared and paid.
On January 1, 2014, Harriet’s issued 12,500 additional shares of common stock for $5 per share. Required:
Using the journal and T-accounts provided, record the transactions that occurred during 2014. If no specific date is provided for a transaction, leave the date column blank. IMPORTANT: Since there are several transactions for which no date is given, the journal entries do NOT need to be in chronological order. All adjusting and closing entries should have December 31, 2014 as the date.
Prepare the balance sheet, statement of retained earnings and income statement for Harriet’s Hats, Inc. for the year ended December 31, 2014.
Record the closing entries for the company (this step is often skipped, don’t lose these points).
Check Figures:
Income Taxes Expense: $3,861
Total Current Liabilities: $94,626
Total Current Assets: $262,835
I need the detailed Journal Entries for all the Transactions and the Calculations for LIFO, Depreciation, and the Final Balance Sheet finished. Thanks So Much!!
Here is the Balance Sheet I need.
Assets
Cash
$ 45,000
Accounts Receivable
45,000
Less: Allowance for Doubtful Accounts
(4,500)
Net Accounts Receivable
40,500
Prepaid Rent
21,000
Inventory
70,000
Total Current Assets
$ 176,500
Property, Plant, and Equipment
87,000
Less: Accumulated Depreciation
(52,200)
Net Property, Plant, and Equipment
34,800
Total Assets
$ 211,300
Liabilities and Owner’s Equity
Accounts Payable
$ 5,000
Wages Payable
4,000
Interest Payable
1,000
Income Taxes Payable
5,000
Notes Payable
50,000
Total Current Liabilities
$ 65,000
Common Stock (15,000 shares outstanding, $1 par)
15,000
Additional Paid In Capital
25,000
Retained Earnings
106,300
Total Liabilities and Owner’s Equity
$ 211,300
Explanation / Answer
Harriet's Hats
Journal
Income Statement for the year ended December 31, 2014
For the year ended December 31, 2014
* Cost of goods sold (LIFO) = Beginning inventory + Purchases - Ending inventory = $ ( 70,000 + 173,750 - 17,500) = $ 226,250
Balance Sheet as of December 31, 2014:
Date Accounts payable Debit Credit 2014 $ $ January 1 Cash 62,500 Common stock 12,500 Additional paid-in capital 50,000 January 1 Wages payable 4,000 Cash 4,000 January 1 Fixtures 20,000 Cash 20,000 January 15 Purchases 27,000 Accounts payable 27,000 January 29 Accounts payable 21,600 Cash 21,600 March 15 Income taxes payable 5,000 Cash 5,000 March 22 Purchases 38,000 Accounts payable 38,000 April 1 Cash 5,000 Equipment 4,250 Gain on sale of equipment 750 April 16 Accounts payable 45,600 Cash 45,600 April 30 Interest expense 2,000 Interest payable 1,000 Cash 3,000 July 1 Allowance for doubtful accounts 9,350 Accounts receivable 9,350 August 1 Prepaid rent 48,000 Cash 48,000 August 5 Purchases 48,750 Accounts payable 48,750 October 2 Accounts Payable 48,760 Cash 48,750 October 26 Purchases 60,000 Accounts payable 60,000 October 31 Interest expense 3,000 Cash 3,000 November 1 Note payable 50,000 Cash 50,000 November 30th Accounts payable 36,000 Cash 36,000 December 1 Cash 62,000 Note payable 62,000 December 1 Retained earnings 8,000 Dividends payable 8,000 December 1 Dividends payable 8,000 Cash 8,000 Accounts receivable 348,000 Sales 348,000 Cash 250,000 Accounts receivable 250,000 Rent expense 41,000 Prepaid rent 41,000 Depreciation expense 8,950 Accumulated depreciation 8,950 Bad debt expense 18,215 Allowance for doubtful accounts 18,215 Interest expense 465 Interest payable 465 Wages expense 29,500 Cash 28,000 Wages payable 1,500 Income tax expense 3,861 Income taxes payable 3,861Related Questions
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