Presented below is the balance sheet of Harriet's Hats as of December 31, 2009, along with some of the transactions that occurred during 2010. Harriet's Hats Ltd. Balance Sheet December 31, 2009
Assets
Current Assets:
Cash $5,000
Accounts Receivable 3,000
Prepaid Rent 500
Inventories 4,000
Total Current Assets $12,500
Property, Plant and Equipment $20,000
Less: Accumulated Dep. (3,500)
Property, Plant and Equipment (net) 16,500
Total Assets $29,000
Liabilities and Owner's Equity
Current Liabilities:
Accounts Payable $ 2,500
Accrued Wages 170
Accrued Interest 90
Notes Payable 2,700
Total Current Liabilities $ 5,460
Common Stock 15,000
Retained Earnings 8,540
Total Shareholders' Equity $23,540
Total Liabilities and Shareholders' Equity $29,000
Prepare the original and the adjusting journal entries at the end of 2010
1. On September 1, 2010, the company issued a short-term note for $3,000 and on the same date retired the note that was outstanding at the beginning of the period. The old note had a 10 percent interest rate, had been issued on September 1, 2009, and required semi-annual interest payment on February 28 and August 31. The new note carried an 8 percent interest rate with similar payment terms.
2. Rent payments of $1,800 each were made on March 1 and September 1. The payments were for rent on office building and were prepaid for six months.
3. Sales employees were paid $12,000 in salaries during the year. Records indicate that salaries for the last week of December amounted to $250 and would be paid at the end of the first week of January (a two week pay period).
1. Prepare all the journal entries on 12/31/2010 if the firm does not follow the reversing entries convention for recording interest, rent and salaries.
2. Prepare all the journal entries. including the ones on 1/1/2010 and 12/31/2010, if the firm follows the reversing entries convention for recording interest, rent and salaries.
1. Prepare all the journal entries, including the adjusting entries on 12/31/2010, for recording all the transactions related to note, interest on note, rent and salaries during 2010. assume that the firm does not follow the reversing entries convention.
2. Prepare all the journal entries, including the reversing entries on 1/1/2010 and adjusting entries on 12/31/2010, for recording all the transactions related to note, interest on note, rent and salaries during 2010. assume that the firm does follow the reversing entries convention and records all cash receipts and cash payments to a nominal account.