Happy Harry Pets was incorporated on January 1st. The business maintains a retai
ID: 2407538 • Letter: H
Question
Happy Harry Pets was incorporated on January 1st. The business maintains a retail pet store, providing gourmet dog food and
treats, and also provides a full range of pet care services, including grooming, dog-walking, and boarding.
The following transactions occurred during the first twelve months of operations:
January 1st Common stock is issued in exchange for cash in the amount of ………….………….……………………… 295,000
February 8th The company purchases and pays for 160 units of gourmet dog food at a price of $25 per unit ………….. 4,000
March 1st The company pays cash for a one-year insurance policy in the amount of ……………….………………………..….. 9,300
March 31st Rent on a retail space for 12 months is paid in the amount of …..……….……………………………………… 12,480
April 1st Grooming and boarding equipment with a useful life of 2 years is purchased for cash in the amount of …… 18,000
April 10th Grooming supplies purchased on account in the amount of …………..…………………………………………… 1,450
May 15th The company purchases and pays for another 370 units of gourmet dog food at a price of $29 per unit ….. 10,730
May 30th Grooming services are performed on account in the amount of …………………………………………………………..………… 13,625
June 1st The company pays for advertisements to be run for the next 12 months in the amount of ………………………. 864
June 30th The company issues a 5-year bond with a face value of $100,000 and a stated annual rate of 6%.
Interest is due on June 30th each year. The market rate is 8% on the date of issuance ……………………………. 100,000
July 25th Dog-walking services are performed on account in the amount of …...……………………………..………… 14,225
July 31st 95 units of gourmet dog food are sold for $70 per unit with terms 2/10, n/30. The sale is recorded using
the gross method in the amount of (see note c for cost flow assumptions) ……………………………………………………………………………………. 6,650
August 2nd Boarding services are provided on account in the amount of ………………………………………………………………. 6,280
August 6th The company receives full payment from the customer for the July 31st sale ……………………………………… 6,517
September 15th Pet sitting services are performed on account in the amount of ……………………..…………………………….………….. 6,245
September 29th Customer payments are received for services previously provided in the amount of ……………………………….. 1,250
October 13th 100 units of gourmet dog food are sold for $73 per unit with terms 2/10, n/30. The sale is recorded using
the gross method in the amount of ………………………………………………………………………………………. 7,300
October 29th The company receives payment for half of the October 13th sale ……………………………………………………… 3,650
November 1st Equipment originally purchased on April 1st for $2400 is sold for $2000 cash
November 15th A bookkeeper is hired to help the company with daily accounting taxes and annual tax preparation
December 15th The bookkeeper is paid $3,500 for the previous month's services 3,500
Additional information:
a. Grooming supplies on hand at the end of the month are as follows: ……………………………………. 870
b. The year-end balance reported at the end of the year for the Allowance for Doubtful Accounts
is estimated as 4% of outstanding receivables at the end of the year
c. The Company uses a perpetual inventory system and accounts for costs using the First-In-First-Out cost
flow assumption. On December 31st, a count of ending inventory reveals that there are 335 bags of dog
food on hand.
d. All revenue is recorded in the "Sales Revenue" account and reported net of cash discounts on the income statement.
e. The effective interest method is used to amortize bond premiums and discounts
f. Adjustments are made at the end of the year for prepaid insurance, rent, advertising, depreciation, and interest expense.
g. The bookkeeper is paid a salary of $3,500 on the 15th of every month.
h. The company declared dividends of $650 for the year
i. Assume selling expenses include advertising and supplies expense. All other expenses, other than depreciation
and interest expense, are considered general & administrative.
REQUIRED:
1. Prepare journal entries for each transaction listed above (with descriptions).
2. Post journal entries to the general ledger accounts.
3. Prepare an unadjusted trial balance.
4. Prepare all necessary adjusting journal entries (with descriptions)
and post to the general ledger.
5. Prepare an adjusted trial balance on December 31st.
6. Prepare closing entries, post to the general ledger, and carryforward balances to January 1st of the next year.
7. Prepare the following financial statements on December 31st (ignore income taxes):
a. Income Statement (multi-step, see Example 5.2 in textbook)
b. Statement of Stockholders' Equity
c. Balance Sheet (classified)
d. Statement of Cash Flows (indirect method)
Explanation / Answer
Journal entries
Jan 1 Cash 295000 Common stock 295000 Feb 8 Gournment dog food 4000 Cash 4000 March 1 Insurance 9300 Cash 9300 March 31 Rent 12480 Cash 12480 April 1 Equipment 18000 Cash 18000 April 10 Supplies 1450 Accounts payable 1450 May 15 Purchase 10730 Cash 10730 May 30 Accounts receivable 13625 Service revenue 13625 June 1 Advertisement 864 Cash 864 July 25 Accounts receivable 14225 Service revenue 14225 July 31 Cash 6650 Sales revenue 6650 Aug 2 Accounts receivable 6280 Service revenue 6280 Aug 6 Cash 6517 Accounts reveivable 6517 Sep 15 Accounts receivable 6245 Service revenue 6245 Sep 29 Cash 1250 Cash advance 1250 Oct 13 Cash 7300 Sales revenue 7300 Oct 29 Cash 3650 Accounts receivable 3650 Nov 1 Cash 2000 Sales revenue 2000 Dec 15 Book keeper 3500 Cash 3500Related Questions
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