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): Debit Credit $ 2 6 Account Titles Cash Accounts Receivable Supplies Land Equipment Accumulated Depreciation Software Accumulated Amortization 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 Depreciation Expense Amortization Expense Income Tax Expense Interest Expense Supplies Expense Totals $106 $106

Answer 1

9A. Compute net income and net profit margin(%) as follows: H&H, Inc. Income Statement wN 4 Service Revenue $180 ($95+$13) $108 $5 $5 6 Less: 7 Salaries and wages 8 Depreciation 9 Amortization expense 10 Income tax expense 11 Interest expense 12 Supplies expense 13 Net Income $7 $20 ($13+$19-512) $34 14 Net income - Service revenue 15 Net profit margin 18.9% ($34+$180)x100 9B. The total stockholders' equity is $150 which is more than the liabilities. $83 Opening common stock Opening Retained earnigs Net income Common stock Total stockholders equity $24 $150 The company is financed primarily by stockholders' equity.

9C. Compute current ratio as follows: Current assets Current Ratio = Current liabilities $109 Current Ratio = $43 Current Ratio = 2.53 times Workings: Cash S75 Accounts receivable Supplies Total Current assets S22 S12 $109 Accounts payable Salaries and wages payable Interest payable Income taxpayable Short term note Total Current liabilities $7 $2 $11 (58) $24 (11) Opening Cash balance Short term notes Land purchased Common stock issued Software purchased Payment made for accounts payable Cash revenue Salaries paid Accounts receivable collected Closing cash balance (S12) $130 (395) $34 $75

$13 $19 Opening Supplies Supplies purchased Accounts receivable collected Closing supplies balance S20 $12 Opening Accounts payable Purchases made on credit Paid Accounts payable Closing Accounts receivable $4 $19 (312) $11 Opening Accounts receivable Revenue made on credit Accounts receivable collected Closing Accounts receivable $6 $50 (534) $22