U6200

Accounting for Intl & Public Affairs

NOTE: PLEASE PRINT YOUR NAME and SECTION (U6200-001, 002) AT THE TOP
OF YOUR CASE SUBMISSION.
Case 01: Garrison Furniture
Below is the balance sheet of Garrison Furniture, a retailer of juvenile furniture, as of December
31, 2015. All amounts are expressed in thousands of $.
Cash
Accounts receivable
Inventory
Prepaid expenses
Total current assets
PP&E, at cost
Less: Accumulated depreciation
Net PP&E
Total assets

$ 428
1,680
1,171
475
3,754
4,975
(1,960)
3,015
$ 6,769

Accounts payable
Accrued liabilities (accrued expenses)
Notes payable (short-term debt)
Current portion of long-term debt
Total current liabilities
Long-term debt
Total liabilities
Contributed capital (common stock + APIC)
Retained earnings
Total stockholders equity
Total liabilities and stockholders equity

$ 301
1,088
1,000
585
2,974
1,899
4,873
750
1,146
1,896
$ 6,769

During 2016, the following transactions and events occurred:

1. Sales were $23,409, all of which were made on account, and collections from customers
were $22,657.
2. Purchases of inventory during the year totaled $5,875, all of which were made on
account. Accounts payable relates only to purchases of inventory. Payments on account
were $5,605.
(continued)

3. Compensation costs for sales and administrative personnel totaled $6,830, all of which
was paid during the year.
4. Accrued liabilities (accrued expenses) at December 31, 2015 related to various unpaid
expenses incurred during 2015 and charged to SG&A (selling, general and
administrative) expense in 2015. In 2016, expenses incurred for SG&A totaled $4,822.
Payments to providers of services related to SG&A totaled $4,555.
5. Insurance and rent costs are required to be paid in advance. During 2016, payments of
$1,464 were made for such items and $990 was used up (expired).
6. Purchases of PP&E totaled $855 and were paid during the year. Depreciation on PP&E
totaled $623.
7. PP&E with an original cost of $375 and a net book value of $180 was sold for $225.
8. At the end of the year the company determined that the cost of inventory on hand totaled
$1,442.
9. Additional common stock was issued with proceeds of $1,000 received.
10. The Company repaid the amounts owed for Notes Payable and the current portion of its
long-term debt. An additional $250 of long-term debt was borrowed during the year. Of
the total long-term debt outstanding, $607 is payable within the next 12 months.
11. Interest expense for the year totaled $288 which was paid during the year.
12. Income tax expense for the year totaled $1,700, all of which was paid during the year.
13. Dividends of $200 were declared and paid.

Part A. Record the journal entries for the transactions described. Note that for each numbered
item, there may be more than one journal entry required. A grid for preparing the entries is on
the next page.
Part B. Prepare an income statement for the year ending December 31, 2016. You have been
provided a grid that contains the account titles. You need to insert the amounts. To assist you, I
have provided the net income amount.
Part C. Prepare a balance sheet at December 31, 2016. You have been provided a grid that
contains the account titles. You need to insert the amounts.
You have also been provided T-accounts to assist you in summarizing the transactions. The
preparation of T-accounts is not required but may be helpful in determining account balances.

Part A. Journal entries to record transactions.

Trans
#

Accounts

Dr.

Cr.

Trans
#

Accounts

Dr.

Cr.

Part B. Income statement for the year ending December 31, 2016.
Sales (Revenues)
Cost of goods sold expense (COGS)
Gross profit
Selling, general and administrative expense
(SG&A expense)
Depreciation expense
Interest expense
Gain or loss on sale of PP&E
Earnings before taxes (EBT)
Income tax provision (income tax expense)
Net income

2,597

Note: Typically the income statement shows sub-totals such as gross profit (revenues less
COGS) and earnings before taxes.

Part C. Balance sheet December 31, 2016

Cash
Accounts receivable
Inventory
Prepaid expenses
Total current assets
PP&E, at cost
Less: Accumulated depreciation
Net PP&E
Total assets
Accounts payable
Accrued liabilities (accrued expenses)
Notes payable (short-term debt)
Current portion of long-term debt
Total current liabilities
Long-term debt
Total liabilities
Contributed capital (Common Stock + APIC)
Retained earnings
Total stockholders equity
Total liabilities and stockholders equity

T-Accounts (Not required)

Account:
Debit

Credit

Account:
Debit

Credit

Account:
Debit

Credit

Account:
Debit

Credit

Account:
Debit

Credit

Account:
Debit

Credit

Account:
Debit

Credit

Account:
Debit

Credit

Account:
Debit

Credit

Account:
Debit

Credit

Account:
Debit

Credit

Account:
Debit

Credit

Account:
Debit

Credit

Account:
Debit

Credit

Account:
Debit

Credit

Account:
Debit

Credit

Account:
Debit

Credit

Account:
Debit

Credit

Account:
Debit

Credit

Account:
Debit

Credit

10