Question

Brothers Harry and Herman Hausyerday began operations of their machine shop (H & H Tool, Inc.) on January 1, 2016. The annual reporting period ends December 31. The trial balance on January 1, 2018, follows (the amounts are rounded to thousands of dollars to simplify):

Account Titles	Debit			Credit
Cash	$	3
Accounts Receivable		5
Supplies		12
Land		0
Equipment		69
Accumulated Depreciation				$	6
Software		24
Accumulated Amortization					4
Accounts Payable					5
Notes Payable (short-term)					0
Salaries and Wages Payable					0
Interest Payable					0
Income Tax Payable					0
Common Stock					90
Retained Earnings					8
Service Revenue		0
Salaries and Wages Expense		0
Depreciation Expense		0
Amortization Expense		0
Income Tax Expense		0
Interest Expense		0
Supplies Expense		0
Totals	$	113		$	113

Transactions and events during 2018 (summarized in thousands of dollars) follow:

1. Borrowed $12 cash on March 1 using a short-term note.
2. Purchased land on March 2 for future building site; paid cash, $9.
3. Issued additional shares of common stock on April 3 for $23.
4. Purchased software on July 4, $10 cash.
5. Purchased supplies on account on October 5 for future use, $18.
6. Paid accounts payable on November 6, $13.
7. Signed a $25 service contract on November 7 to start February 1, 2019.
8. Recorded revenues of $178 on December 8, including $49 on credit and $129 collected in cash.
9. Recognized salaries and wages expense on December 9, $94 paid in cash.
10. Collected accounts receivable on December 10, $33.

Data for adjusting journal entries as of December 31:

11. Unrecorded amortization for the year on software, $4.
12. Supplies counted on December 31, 2018, $10.
13. Depreciation for the year on the equipment, $6.
14. Interest of $1 to accrue on notes payable.
15. Salaries and wages earned but not yet paid or recorded, $12.
16. Income tax for the year was $8. It will be paid in 2019.

1. 1, 3, 5 and 8. Set up T-accounts for the accounts on the trial balance. Enter beginning balances and post the transactions (a)-(j), adjusting entries (k)-(p), and closing entry. (Enter your answers in thousands of dollars.)

2. Record the adjusting journal entries (k) through (p). (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in thousands of dollars.)
3. Prepare an unadjusted trial balance. (Enter your answers in thousands of dollars.)
4. Post the adjusting entries from requirement 4 and prepare an adjusted trial balance.

5. 6-a. Prepare an income statement.

6. 6-b. Prepare the statement of retained earnings.

7. 6-c. Prepare the balance sheet.

8. Prepare the closing journal entry. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in thousands of dollars.)
9. Post the closing entry from requirement 7 and prepare a post-closing trial balance. (Enter your answers in thousands of dollars.)

10. 9-a. How much net income did H & H Tool, Inc., generate during 2018? What was its net profit margin?

11. 9-b. Is the company financed primarily by liabilities or stockholders’ equity?

12. 9-c. What is its current ratio?

Answer 1

Note - As per HomeworkLib guidlines we are allowed to process 1 question at a time. When there are multiple questions we can do 1st one. Also only 4 sub-questions in a single question.

1. Journal Entries -

Date Credit H & H Tool, Inc. Journal Entries Accounts Title Debit Cash $ 12 Notes Payable (Short Term) (Being Short term Notes borrowed) a $ 12 b Land $ 9 Cash $ 9 (Being Land Purchased) C Cash $ 23 Common Stock (Being Common Stock Issued) $ 23 d 10 Software $ Cash (Being Software Purchased) $ 10 e 18 Supplies $ Accounts Payable $ (Being Supplies Purchased on account) 18 f Accounts Payable $ 13 Cash (Being Payment made on account) $ 13 No Entry h Cash $ 120 Accounts Receivable $ 40 Service Revenues (Being Service revenue Earned) $ 160 Salaries & wages Expense $ 85 Cash (Being Salaries and Wages Paid) $ 85 Cash $ 24 Accounts Receivable (Being Amount Received on account) $ 24

2. Ledgers -

Cash Interest Payable Op Bal 9 b а 10 $ 1 $ $ $ $ $ с 3 $ 12$ 23 $ 120$ 24 d f 13 85 i cl Bal S 1 h j Cl Bal 65 Income Tax Payable $ 182 $ 182 $ $ 8 p Cl Bal $ 8 Op Bal h Accounts Receivable $ $ 5$ 24 $ 40 j $ 21 Op Bal Common Stock $ 71 $ 23 с Cl Bal $ 94 Supplies 12$ Op Bal 10 1 $ $ 18 Retained Earnings 8 Cl Bal $ 20 Op Bal Land Cl Bal 8 b $ 9 9 Service Revenue $ 160 Cl Bal $ 9 h Cl Bal $ 160 Equipment 60 Op Bal $ Cl Bal $ 60 Salaries and Wages Expense i $ 85 o $ 12 Cl Bal $ 97 Accumulated Depreciation $ 6 Op Bal $ 6 m Depreciation Expense $ 6 Cl Bal $ 12 m Software Cl Bal $ 6 15 Op Bal d $ $ 10 Amortisation Expense $ 5 Cl Bal $ 25 k Op Bal Accumulated Amortisation $ 5 $ 5 k Income Tax Expense $ 8 8 Cl Bal 10 р Cl Bal $ 8 Op Bal Accounts Payable $ 5 $ 13 $ 18 f e Interest Expense $ 1 Cl Bal $ 10 n Notes Payable (Short Term) Cl Bal $ 1 $ 12 a Supplies Expense $ 10 Cl Bal $ 12 Salaries and Wages Payable Cl Bal $ 10 $ 12 o Cl Bal $ 12

3. Unadjusted Trial Balance -

Credit H & H Tool, Inc. Unadjusted Trial Balance Accounts Title Debit Cash $ 65 Accounts Receivable $ 21 Supplies $ 30 Land $ 9 Equipment $ 60 Accumulated Depreciation Software $ 25 Accumulated Amortisation Accounts Payable Notes Payable (Short Term) Common Stock Retained Earnings Service Revenue Salaries and Wages Expense $ 85 $ 6 5 10 12 $ $ $ $ $ $ 94 8 160 $ Total $ 295 $ 295

4. Adjusting Entries -

Date k H & H Tool, Inc. Adjusting Entries Accounts Title Debit Credit Amortisation Expense $ 5 Accumulated Amortisation $ (Being Amortisation Expense incurred) 5 10 Supplies Expense $ Supplies (Being Supplies Expense Incurred) $ 10 m Depreciation Expense $ 6 Accumulated Depreciation (Being Depreciation Expense incurred) $ 6 n Interest Expense $ 1 Interest Payable (Being Interest Expense incurred) $ 1 o Salaries & wages Expense $ 12 Salaries & wages Payable $ (Being Salaries and Wages expense incurred) 12 P 8 Income Tax Expense $ Income Tax Payable (Being Income Tax Expenses incurred) $ 8

5. Adjusted Trial Balance -

Credit $ $ 12 10 10 H & H Tool, Inc. Adjusted Trial Balance Accounts Title Debit Cash $ 65 Accounts Receivable $ 21 Supplies $ 20 Land $ 9 Equipment $ 60 Accumulated Depreciation Software $ 25 Accumulated Amortisation Accounts Payable Notes Payable (Short Term) Salaries and Wages Payable Interest Payable Income Tax Payable Common Stock Retained Earnings Service Revenue Salaries and Wages Expense $ 97 Depreciation Expense $ Amortisation Expense $ 5 Income Tax Expense $ Interest Expense $ 1 Supplies Expense $ 10 12 12 $ $ $ $ $ $ $ $ $ 1 8 94 8 160 6 8 Total $ 327$ 327

6. Income Statement -

H & H Tool, Inc. Income Statement December 31 $'000 $'000 $ 160 Service Revenue 97 6 5 Expenses: Salaries and Wages Expense Depreciation Expense Amortisation Expense Income Tax Expense Interest Expense Supplies Expense Total Expenses $ $ $ $ $ $ 8 1 10 $ 127 Net Income $ 33

7. Statement of Retained Earnings -

H & H Tool, Inc. Statement of Retained Earnings December 31 Retained Earnings, Opening Add: Net Income $ Less: Dividends $ $ 00 33 $ 33 Retained Earnings, Closing $ 41

8. Balance Sheet -

H & H Tool, Inc. Balance Sheet December 31 Assets Current Assets: Cash Accounts Receivable Supplies Total Current Assets $ $ $ 65 21 20 $ 106 9 Land Equipment Accumulated Depreciation Software Accumulated Amortisation $ 60 (12) $ 25 (10) $ $ $ $ $ 48 15 Total Assets $ 178 10 12 Liabilities and Stockholder's Equity Current Liabilities: Accounts Payable Notes Payable (Short Term) Salaries and Wages Payable Interest Payable Income Tax Payable Total Current Liabilities $ $ $ $ $ 12 1 8 $ 43 Total Liabilities $ 43 Stockholder's Equity: Common Stock Retained Earnings 94 $ $ 41 $ 135 Total Liabilities and Stockholder's Equity $ 178

9. Closing Entries -

Date H & H Tool, Inc. Closing Entries Accounts Title Debit Credit Service Revenue $ 160 Income Summary $ 160 (To Record closing entries for revenue) 1 2 $ 97 6 5 Income Summary 127 Salaries and Wages Expense $ Depreciation Expense $ Amortisation Expense $ Income Tax Expense $ Interest Expense $ Supplies Expense $ (To record closing entries for expenses) 8 1 10 3 3 Income Summary $ 33 Retained Earnings $ 33 (To record balance transfer to retained earnings)

10. Post Closing Trial Balance -

Credit $ 12 H & H Tool, Inc. Post Closing Trial Balance Accounts Title Debit Cash $ 65 Accounts Receivable $ 21 Supplies $ 20 Land $ 9 Equipment $ 60 Accumulated Depreciation Software $ 25 Accumulated Amortisation Accounts Payable Notes Payable (Short Term) Salaries and Wages Payable Interest Payable Income Tax Payable Common Stock Retained Earnings 10 10 12 12 $ $ $ $ $ $ $ $ 1 8 94 41 Total $ 200$ 200