Comprehensive Individual Project: Harriets Hats, Inc. Harriets Hats is a fictional company. The following information includes the balance sheet as of December 31, 2019, and the details of the transactions that occurred during 2020. Background: Harriets Hats is a hat retailer (in other words, Harriets buys hats from a hat manufacturer and then sells them in their stores). Transactions for 2020 are representative of such a companys 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. Required: 1. Using the T-accounts provided, record the transactions that occurred during 2020. 2. Prepare the balance sheet, retained earnings statement, and income statement for Harriets Hats, Inc. for the year ended December 31, 2020. Transactions for 2020: 1. Sales and Accounts Receivable a. During the year, each hat had a sales price of $30. All sales were made on account. b. Cash collections on account amounted to $41,000. c. During the year, Harriets identified $350 of receivables as being uncollectible and wrote them off. d. Harriets follows a percentage-of-receivables approach to estimate its accounts receivable that will become uncollectible. As of the end of 2020, Harriets estimates that 12% of its receivables will be uncollectible. 2. Inventory a. Harriets began 2020 with 500 hats which had a cost of $8 each. Employees physically counted 525 hats remaining in the warehouse at the end of 2020. Harriets uses a periodic LIFO inventory system to cost their inventory. The following purchases (all on account) were made during 2020: (1) January 15th 405 hats @ $10.00 each (2) March 23rd 310 hats @ 12.00 each (3) July 2nd 525 hats @ $14.00 each (4) October 31st 430 hats @ 15 each b. During 2020, Harriets made cash payments to inventory suppliers totaling $21,000. 3. Property, Plant and Equipment a. Harriets uses straight-line depreciation for all of its store fixtures and office equipment. b. Below is a schedule of the store fixtures and office equipment Harriets had in place at the end of 2019. c. On January 1, new store fixtures were purchased for $3,000 in cash. Harriets expects the fixtures to have a 5 year useful life and a $500 salvage value. d. On July 1, office equipment (ID#1876) was sold for $520. FIXTURES AND EQUIPMENT (as of December 31, 2019) ID # Historical Cost Estimated Useful Life Estimated Salvage Value Date acquired 1256 $12,000 10 years $1,200 Jan. 1, 2014 1876 $1,700 5 years $300 Jan. 1, 2016 4299 $23,000 5 years $1,000 Jan. 1, 2019

4. Debt a. On September 1, 2020, Harriets paid-off the note payable that was outstanding at the beginning of the period. The note had an 8% interest rate, had been issued on September 1, 2019, and required semiannual interest payments on February 28 and August 31. b. Also on September 1, 2020, Harriets borrowed $3,500 on a new note payable. The new note carries a 6% interest rate with similar payment terms as the note Harriets just paid-off. 5. Operations a. Harriets made two rent payments of $1,650 during 2020 (on March 1 and September 1). The payments were for rent on the store building and were prepaid for six months each. The balance in the prepaid account at the end of 2020 represents the rent for January and February 2021. b. Cash paid out during 2020 for wages totaled $12,200. Records indicate that salaries for the last week of December amounted to $300 and would be paid at the end of the first week in January (a two-week pay period). c. Other expenses (paid in cash) totaled $2,102. 6. Income Taxes a. In March of 2020, Harriets paid their 2019 income taxes. Harriets has a 30% income tax rate for both 2019 and 2020. 7. Common Stock a. Dividends of $3,300 were declared and paid during 2020. b. New common stock was issued for $12,000 during 2020. Harriets Hats, Inc. Balance Sheet December 31, 2019 Assets Cash $15,000 Accounts Receivable 5,000 Less: Allowance for Bad Debts (500) Net Accounts Receivable 4,500 Prepaid Rent 500 Inventory 4,000 Total Current Assets 24,000 Property, Plant, and Equipment 36,700 Less: Accumulated Depreciation (12,000) Net Property, Plant, and Equipment 24,700 Total Assets $48,700 Liabilities and Owners Equity Accounts Payable $2,500 Wages Payable 170 Interest Payable 64 Income Taxes Payable 900 Notes Payable 2,400 Total Current Liabilities 6,034 Common Stock 20,000 Retained Earnings 22,666 Total Liabilities and Owners Equity $48,700

Prepare an Income Statement, Balance Sheet, Statement of Retained Earnings.

NAME: _______________________________

Accumulated Depreciation

Accounts Payable

Wages Payable

Interest Payable

Income Taxes Payable

Notes Payable

Common Stock

Retained Earnings

Cost of Goods Sold

Sales Revenue

Purchases

Bad Debts Expense

Rent Expense

Interest Expense

Other Expenses

Depreciation Expense

Wages Expense

Income Summary

Gain/Loss on Sale of Equipment

Income Tax Expense