Maria Jordan operates the Stuff I Knit Inc. (SITI) business in which she purchases and sells...

      

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Maria Jordan operates the Stuff I Knit Inc. (SITI) business in which she purchases and sells unique knit hats via her consumer direct web site out of her Glen Rock, NJ facility. SITI has the following November 30, 2022 Trial Balance listed below for the first 11 months of its fiscal 2022 operations. November 30, 2022 Trial Balance - SITI 1 Cash 2 Accounts Receivable 3 Allowance for U/C Accts 4 Inventory (5,000 units x $10.50 unit cost) 5 Equipment (1) 6 Accumulated Depreciation - Equipment (1) 7 Land (2) 8 Accounts Payable 9 Salaries Payable 10 Income Tax Payable 11 Interest Payable 12 Notes Payable (3) 13 Common Stock 14 Retained Earnings 15 Revenue 16 Cost of Sales 17 Salaries Expense 18 Advertising Expense 19 Rent Expense 20 Income Tax Expense 21 Depreciation Expense - Equipment 22 Interest Expense 23 Dividends 24 Bad Debt Expense Totals Beginning Balances Debits 2,000 10,700 52,500 240,000 68,600 117,900 66,400 16,400 35,600 22,000 2,750 Credits 1,100 118,000 1,300 2,750 25,000 50,000 177,300 259,400 634,850 634,850 Footnotes: (1) The Equipment was purchased on 1/1/18 and is being depreciated over 10 years, Straight-line method with no residual value. Note, 11 months of 2022 depreciation has already been expensed. (2) Land was purchased earlier this year for a potential new store site for the business. No depreciation on the Land. (3) The $25k Notes Payable was issued on 1/1/21 and will only be fully due on 1/1/24. Interest is paid annually on 1/1 of each year and the note will be paid on 1/1/24 (i.e., no payments until final maturity date). Interest rate is 12% annually. SITI has the following transactions during the month of December 2022: Dec 1 - Issue Common Stock for $15,000 and receive cash from new stockholders. Dec 3 - Purchases 2,500 units of hat inventory for $11 per unit ($27,500 total) on account Dec 5 - Purchases 3,500 units of hat inventory for $12 per unit ($42,000 total) on account Dec 7 - Purchases 2,900 units of hat inventory for $13 per unit ($37,700 total) on account Dec 8 - Return 200 damaged units from the Dec 3rd purchase to the vendor (cost= $11 per unit/Total Cost-$2.200) Dec 10-Sells 6,300 units at $22 per unit on account - $138,600 total revenue (LIFO inventory method is used for cost purposes - Note: 2-part journal entry) Dec 11 - Receives cash of $102,000 from customers for prior sales on account Dec 13 - Pays $50,000 in cash for prior vendor purchases made on account Dec 14 Purchases 1,900 units of hat inventory for $15 per unit ($28,500 total) on account Dec 18-Sells 4,400 units at $24 per unit on account - $105,600 total (LIFO inventory method is used for cost purposes - Note: 2-part journal entry) Dec 20 Receives cash of $105,000 from customers for prior sales on account Dec 23-Pays $61,000 in cash for prior vendor purchases made on account Dec 28 - Write-off accounts receivable as uncollectible - $1,900 Dec 28 - Pay for employee salaries in cash - $12,000 Dec 28 - Pay for December Advertising expense in cash - $25,000 Dec 30 - Pay for monthly rent in cash - $3,000 Dec 30-Pay dividends to shareholders in cash, $70,000 SITI has the following 5 adjusting entries which need to be recorded as of 12/31/22 as well: 1. Uncollectible accounts are determined using an aging methodology. The company has determined that the accounts receivable is estimated to have 6.0% as uncollectible. Please prepare the appropriate adjusting journal entry for the Accounts Receivable allowance. (Hint: Use Accounts Receivable and Allowance for Uncollectible Accts T Account balances to calculate.) 2. The Equipment is being depreciated over 10 years on a straight-line basis with no residual value - see footnote 1 above. SIT has recorded monthly depreciation expense during 2022, but has not recorded the entry for December 2022 depreciation and will need to make the adjusting entry accordingly. 3. SITI has accrued the interest expense for the first 11 months of fiscal 2022 on the Notes Payable, but has not yet recorded the entry for December 2022. Please record the December adjusting entry to recognize the interest expense. Note, the annual interest on the Notes Payable is 12%. 4. Accrued salaries earned, but not paid as of 12/31/22 for December totals $4,040. Please make the appropriate adjusting entry. 5. SITI estimates that accrued income taxes are $8,500 for 2022. Please make the appropriate adjusting entry. Maria's regular accountant is out on leave so she has requested you to perform the following related to SITI's accounting in December 2022: 1. Record all regular journal entries and adjusting journal entries. (12 Points) Note: All of the accounts used by SITI are listed in the opening Trial Balance, but Bad Debt Expense, Income Tax Expense, Salaries Payable, Income Tax Payable, and Dividends are all at zero balances to start the month of December 2022. These accounts will be used in December 2022 journal entries. 2. Prepare an Adjusted Trial Balance as of 12/31/2022. (12 Points) (Note: Use T Accounts to assist) 3. Prepare Financial Statements as of 12/31/2022 for SITI (12 Points) a. Income Statement - Multi-Step format b. Statement of SH Equity c. Balance Sheet Maria Jordan operates the Stuff I Knit Inc. (SITI) business in which she purchases and sells unique knit hats via her consumer direct web site out of her Glen Rock, NJ facility. SITI has the following November 30, 2022 Trial Balance listed below for the first 11 months of its fiscal 2022 operations. November 30, 2022 Trial Balance - SITI 1 Cash 2 Accounts Receivable 3 Allowance for U/C Accts 4 Inventory (5,000 units x $10.50 unit cost) 5 Equipment (1) 6 Accumulated Depreciation - Equipment (1) 7 Land (2) 8 Accounts Payable 9 Salaries Payable 10 Income Tax Payable 11 Interest Payable 12 Notes Payable (3) 13 Common Stock 14 Retained Earnings 15 Revenue 16 Cost of Sales 17 Salaries Expense 18 Advertising Expense 19 Rent Expense 20 Income Tax Expense 21 Depreciation Expense - Equipment 22 Interest Expense 23 Dividends 24 Bad Debt Expense Totals Beginning Balances Debits 2,000 10,700 52,500 240,000 68,600 117,900 66,400 16,400 35,600 22,000 2,750 Credits 1,100 118,000 1,300 2,750 25,000 50,000 177,300 259,400 634,850 634,850 Footnotes: (1) The Equipment was purchased on 1/1/18 and is being depreciated over 10 years, Straight-line method with no residual value. Note, 11 months of 2022 depreciation has already been expensed. (2) Land was purchased earlier this year for a potential new store site for the business. No depreciation on the Land. (3) The $25k Notes Payable was issued on 1/1/21 and will only be fully due on 1/1/24. Interest is paid annually on 1/1 of each year and the note will be paid on 1/1/24 (i.e., no payments until final maturity date). Interest rate is 12% annually. SITI has the following transactions during the month of December 2022: Dec 1 - Issue Common Stock for $15,000 and receive cash from new stockholders. Dec 3 - Purchases 2,500 units of hat inventory for $11 per unit ($27,500 total) on account Dec 5 - Purchases 3,500 units of hat inventory for $12 per unit ($42,000 total) on account Dec 7 - Purchases 2,900 units of hat inventory for $13 per unit ($37,700 total) on account Dec 8 - Return 200 damaged units from the Dec 3rd purchase to the vendor (cost= $11 per unit/Total Cost-$2.200) Dec 10-Sells 6,300 units at $22 per unit on account - $138,600 total revenue (LIFO inventory method is used for cost purposes - Note: 2-part journal entry) Dec 11 - Receives cash of $102,000 from customers for prior sales on account Dec 13 - Pays $50,000 in cash for prior vendor purchases made on account Dec 14 Purchases 1,900 units of hat inventory for $15 per unit ($28,500 total) on account Dec 18-Sells 4,400 units at $24 per unit on account - $105,600 total (LIFO inventory method is used for cost purposes - Note: 2-part journal entry) Dec 20 Receives cash of $105,000 from customers for prior sales on account Dec 23-Pays $61,000 in cash for prior vendor purchases made on account Dec 28 - Write-off accounts receivable as uncollectible - $1,900 Dec 28 - Pay for employee salaries in cash - $12,000 Dec 28 - Pay for December Advertising expense in cash - $25,000 Dec 30 - Pay for monthly rent in cash - $3,000 Dec 30-Pay dividends to shareholders in cash, $70,000 SITI has the following 5 adjusting entries which need to be recorded as of 12/31/22 as well: 1. Uncollectible accounts are determined using an aging methodology. The company has determined that the accounts receivable is estimated to have 6.0% as uncollectible. Please prepare the appropriate adjusting journal entry for the Accounts Receivable allowance. (Hint: Use Accounts Receivable and Allowance for Uncollectible Accts T Account balances to calculate.) 2. The Equipment is being depreciated over 10 years on a straight-line basis with no residual value - see footnote 1 above. SIT has recorded monthly depreciation expense during 2022, but has not recorded the entry for December 2022 depreciation and will need to make the adjusting entry accordingly. 3. SITI has accrued the interest expense for the first 11 months of fiscal 2022 on the Notes Payable, but has not yet recorded the entry for December 2022. Please record the December adjusting entry to recognize the interest expense. Note, the annual interest on the Notes Payable is 12%. 4. Accrued salaries earned, but not paid as of 12/31/22 for December totals $4,040. Please make the appropriate adjusting entry. 5. SITI estimates that accrued income taxes are $8,500 for 2022. Please make the appropriate adjusting entry. Maria's regular accountant is out on leave so she has requested you to perform the following related to SITI's accounting in December 2022: 1. Record all regular journal entries and adjusting journal entries. (12 Points) Note: All of the accounts used by SITI are listed in the opening Trial Balance, but Bad Debt Expense, Income Tax Expense, Salaries Payable, Income Tax Payable, and Dividends are all at zero balances to start the month of December 2022. These accounts will be used in December 2022 journal entries. 2. Prepare an Adjusted Trial Balance as of 12/31/2022. (12 Points) (Note: Use T Accounts to assist) 3. Prepare Financial Statements as of 12/31/2022 for SITI (12 Points) a. Income Statement - Multi-Step format b. Statement of SH Equity c. Balance Sheet