General Products Inc. is incorporated in Nevada, USA on Jan 1st 2013 to take over a local retail chain.

  

General Products 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. General Products 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 General Products as of Dec 2015 and the financial data for 2016.The same information is provided below.

   

Balance Sheet of General Products    Inc. on December 31, 2015

 

ASSETS

 

Current Assets

 

Cash and Cash Equivalent

 11,980

 

Accounts Receivables 

 20,520

 

Inventory

317,060

 

Inventory of Premiums   (@0.10 per premium) 

        660

 

Total Current Assets 

350,220

 

LONG TERM ASSETS

 

Investments

 66,775

 

Property Plant and   Equipment 

750,000

 

Less Accumulated   Depreciation 

 90,000

660,000

 

Total Long Term   Assets 

726,775

 

INTANGIBLE ASSETS

 

Trade Marks 

190,000

 

Total Assets 

1,266,995

 

LIABILITIES AND   SHAREHOLDERS' EQUITY

 

Current Liabilities 

 

Accounts Payable 

50,772 

 

Liability for Premiums and   Coupons 

      550 

 

5% Short Term Notes Payable   due on March 31, 2016 

  8,000

 

Accrued Interest on 6%   Bonds Payable 

  3,000 

 

Total Current Liabilities 

62,272

 

6% Bonds Payable due   2020 

100,000

 

Unamortized Discount   on Bonds Payable 

   6,732

93,268

 

Total Liabilities

155,540

 

Stockholder's Equity

 

Common Stock

 

125,000 shares, par value   $1 authorized 100,000 shares issued and outstanding

130,000

 

Paid-in Capital in Excess   of Par

946,000

 

Retained Earnings

 35,455

 

Total Stockholders' Equity

1,111,455

 

 

Total Liabilities and   Stockholders' Equity

1,266,995

  

General Products 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 TradeMark. General Products 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 General Products brand 6000 soap powder boxes General Products 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-annually 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, General Products 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 Straight 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. Purchases of inventory total $689,525. All purchases are on credit.

 

10. General Products 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.