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.

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 the account. b. Cash collections on account amounted to $41,000. c. During the year, Harriet 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, Harriet 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.

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

c. On January 1, new store fixtures were purchased for $3,000 in cash. Harriet 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

4. Debt a. On September 1, 2020, Harriet 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

oncome 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