Problem - GeneralProducts Inc. is incorporated in Nevada, USA on Jan 1st 2013 to take over a local retail chain. The objective of the company is to supply goods of everyday use to customers at the most competitive prices. GeneralProducts has established a chain of stores throughout USA. The retail operations of the company are so designed that customers can shop seamlessly in stores and online.
You may use the attached Balance Sheet of GeneralProducts as of Dec 2015 and the financial data for 2016.The same information is provided below.
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Balance Sheet of GeneralProducts Inc. on December 31, 2015
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ASSETS
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Current Assets
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Cash and Cash Equivalent
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11,980
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Accounts Receivables
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20,520
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Inventory
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317,060
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Inventory of Premiums (@0.10 per premium)
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660
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Total Current Assets
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350,220
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LONG TERM ASSETS
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Investments
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66,775
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Property Plant and Equipment
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750,000
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Less Accumulated Depreciation
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90,000
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660,000
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Total Long Term Assets
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726,775
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INTANGIBLE ASSETS
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Trade Marks
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190,000
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Total Assets
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1,266,995
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current Liabilities
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Accounts Payable
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50,772
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Liability for Premiums and Coupons
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550
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5% Short Term Notes Payable due on March 31, 2016
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8,000
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Accrued Interest on 6% Bonds Payable
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3,000
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Total Current Liabilities
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62,272
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6% Bonds Payable due 2020
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100,000
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Unamortized Discount on Bonds Payable
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6,732
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93,268
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Total Liabilities
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155,540
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Stockholder's Equity
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Common Stock
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125,000 shares, par value $1 authorized 100,000 shares issued and outstanding
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130,000
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Paid inCapital in Excess of Par
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946,000
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Retained Earnings
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35,455
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Total nStockholders' Equity
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1,111,455
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Total Liabilities and Stockholders' Equity
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1,266,995
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GeneralProducts provides us financial and business related data for 2016 below.
1. Trades Marks were acquired for $200,000 in 2015.Estimated useful at the time of acquisition was 20 years
There was a litigation brought out by a competitor against the Trade Mark. GeneralProducts could successfully defend this litigation at a cost of $ 45,000. New useful life of Trade Mark is estimated to be 25 years from the date of acquisition.
2. All sales are on credit and total $ 940,560. COGS are $780,650.
3. Included in the total sales of $940,560 are the sales of GeneralProducts brand 6000 soap powder boxes GeneralProducts includes one coupon in every soap powder box. Customers can redeem 4 coupons for one Kitchen utensil. Based on past experience 60% of the coupons are redeemed by customers. During 2016 3,400 coupons were redeemed. Purchase of premiums during 2016 total 1,000 premiums @ $1.10 each on credit.
4. 6% Bonds Payable are issued on Jan 1 2015 to yield 8% interest. Interest is paid semi-annualy on Jan 1st and June 30th.
General Products can redeem these Bonds any time after June 30,2016 @ 101.
5. To take advantage of lower interest rates and to finance the redemption of 6% Bonds on Sept.1st 2016, GeneralProducts issued 5%Bonds in the face value of $100,000 to yield 6% The maturity period of these 5% Bonds is 10 years and interest is paid semi-annually on 1st Jan and 30th June. The proceeds from the issue of 5% Bonds are used to redeem 6% Bonds Payable @ 101 on Sept.1st 2016.
6. Selling Administrative Expenses excluding depreciation are $87,345. PP&E is depreciated on Striaght Line Method over 25 years of life.
7. Cash collected from customers total $906,450
8. Cash paid to suppliers for credit purchases total $728,254
9. Purcahses of inventory total $689,525.All purchases are on credit.
10. GeneralProducts purchased Land for $30,000 for construction of building
Requirements -
1. Record the necessary journal entries for 2016.
2. Prepare Income Statement and Retained Earnings Statement for the year 2016.
3. Prepare Balance Sheet on December 31, 2016.
4. Show full work of all the financial items reported in Income Statement and Balance Sheet. Please round your calculations closest to $. Ignore tax.