Harriet's Hats, Inc. NAME: Harriet's Hats is a fictional company. The following information includes the balance sheet as of December 31, 2021, and the details of the transactions that occurred during 2022. 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 2022 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. Transactions for 2022: 1. 2. 3. Sales and Accounts Receivable a. Harriet's hats during 2022 had a sales price of $120 per hat. All sales were made on account. b. Cash collections on account amounted to $1,340,000. c. On July 1, 2022, Harriet's identified $21,200 of receivables as being uncollectible and wrote them off. d. Harriet's follows a percentage-of-receivables approach to estimate their accounts receivable that will become uncollectible. As of the end of 2022, Harriet's estimates that 10% of their receivables will be uncollectible. Inventory a. Harriet's began 2022 with 3,200 hats which had a cost of $55 each. Employees physically counted 1,850 hats remaining in the warehouse at the end of 2022. Harriet's uses a periodic LIFO inventory system to cost their inventory. The following purchases (all on account) were made during 2022: babi i. January 15th - 4,100 hats @ $60.00 each ii. March 22nd -3,150 hats $52.00 each iii. August 5th-4,300 hats @562.00 each iv. October 26th - 1,600 hats @ $65.00 each b. During 2022, Harriet's made cash payments to inventory suppliers on the following dates: i. January 29th- $233,700 ii. April 16th - $234,360 iii. October 2nd - $270,900 iv. November 30th - $93,600 Property, Plant and Equipment a. Harriet's 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 Harriet's had in place at the end of 2021. FIXTURES AND EQUIPMENT (as of December 31, 2021) ID # Historical Cost Estimated Useful Life Estimated Date acquired Salvage Value 1256 $48,000 12 years 1876 $70,000 10 years $0 $4,000 Jan. 1, 2015 Jan. 1, 2016 4299 $92,000 8 years $8,000 Jan. 1, 2020 c. On January 1, 2022, new store fixtures were purchased for $43,000 in cash. Harriet's expects the fixtures to have a 10 year useful life and a $4,000 salvage value. d. On April 1, 2022, office equipment (ID# 1876) was sold for $24,930. 4. 5. 6. 7. Required: 1. 2. 3. Debt a. On August 1, 2022, Harriet's paid-off the note payable that was outstanding at the beginning of the period. The note had an 10% interest rate, had been issued on August 1, 2021, and required semiannual interest payments on Jan 31, 2022, and July 31, 2022. b. On October 1, 2022, Harriet's borrowed $65,000 on a new note payable. The new note carries a 4% interest rate with semiannual interest payments required on March 31, 2023, and September 30, 2023. Operations a. Harriet's made a rent payment of $114,000 on August 1, 2022. 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 2021 represents the rent for January through July 31, 2022, that was paid for on August 1, 2021. b. Cash paid out during 2022 for wages totaled $185,000. Records indicate that salaries for the last week of December 2022 amounted to $11,500 and would be paid at the end of the first week in January 2022 (a two-week pay period). c. Other expenses (paid in cash) totaled $19,800. Income Taxes a. On March 15, 2022, Harriet's paid their 2021 income taxes. Harriet's will pay their 2022 income taxes on March 15, 2023. Harriet's has a 40% income tax rate for both 2021 and 2022. Common Stock a. On December 1, 2022, dividends of $35,000 were declared and paid. b. On January 1, 2022, Harriet's issued 15,000 additional shares of common stock for $4 per share. Using the journal and T-accounts provided, record the transactions that occurred during 2022. If no specific date is provided for a transahen, 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, 2022, 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, 2022. Record the closing entries for the company (this step is often skipped, don't lose these points). Check Figures: Basic Earnings Per Share: $13.68 Total Current Assets: $828,140 Total Stockholders' Equity: $638,550 RUTZA Harriet's Hats Balance Sheet For the Year Ended December 31, 2021 Assets Cash $ 53,000 Accounts Receivable 186,000 Less: Allowance for Doubtful Accounts (18,600) Net Accounts Receivable 167,400 Prepaid Rent 45,150 Inventory 176,000 Total Current Assets $ 441,550 Property, Plant, and Equipment 210,000 Less: Accumulated Depreciation (88,600) Net Property, Plant, and Equipment 121,400 Total Assets S 562,950 Liabilities and Stockholders' Equity Accounts Payable $ 62,000 Wages Payable 6,000 Interest Payable 5,000 Income Taxes Payable 30,000 Notes Payable 120,000 Total Current Liabilities $ 223,000 Common Stock (5,000 shares outstanding, $1 par) 5,000 Additional Paid In Capital 55,000 Retained Earnings 279,950 Total Liabilities and Stockholders' Equity S 562,950