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 Account Titles Cash Accounts Receivable Supplies Land Equipment Accumulated Depreciation Software Accumulated Amortization Accounts Payable Notes Payable (short-tera) 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 Transactions and events during 2018 (summarized in thousands of dollars) follow a. Borrowed 511 cash on March 1 using a short-term note. b. Purchased land on March 2 for future building site: paid cash, 58 c.Issued additional shares of common stock on April 3 for $30. d. Purchased software on July 4, 511 cash. e. Purchased supplies on account on October 5 for future use. $19 Paid accounts payable on November 6, $12 g. Signed a 520 segice contract on November 7 to start February 1, 2019 . Recorded revenues of $148 on December 8, including $34 on credit and $114 collected in cash Recognized salaries and wages expense on December 9, 579 paid in cash J. Collected accounts receivable on December 10, $18. Date for adjusting journal entries as of December 31: k Unrecorded amortization for the year on software. 56. 1. Supplies counted on December 31, 2018. $12. m. Depreciation for the year on the equipment. $5 n. Interest of $1 to accrue on notes payable. o. Salaries and weges earned but not yet paid or recorded, $11 p. Income tax for the year was 57. It will be paid in 2019 C4-2 Part 6 6-a. Prepare an income statement 6.b. Prepare the statement of retained earnings 6-c. Prepare the balance sheet. 09

Answer 1

Income Statement
Revenues
Service Revenue		$                    148
Expenses
Salaries and Wages Expense	$                      90
Depreciation Expense	$                        5
Amortization Expense	$                        6
Income Tax Expense	$                        7
Interest Expense	$                        1
Supplies expense	$                      20
Total Expenses		$                    129
Net Income		$                      19
Statement of Retained Earnings
Beginning Balance	$                        9
Add : Net income	$                      19
Less Dividend	$                       -
Ending Balance	$                      28
Balance Sheet
Assets
Current Assets
Cash	$                      65
Accounts Receivable	$                      22
Supplies	$                      12
Total Current Assets		$                      99
Non Current Assets
Land		$                        8
Equipment	$                      54
Less : Accumulated Depreciation	$                    -10
Equipment, net of Accumulated Depreciation		$                      44
Software	$                      32
Less : Accumulated Amortization	$                    -12
Software, net of Accumulated Amortization		$                      20
Total Non Current Assets		$                      72
Total Assets		$                    171
Liabilities & Stockholder's Equity
Current Liabilities
Accounts Payable	$                      11
Notes Payable	$                      11
Salaries and Wages Payable	$                      11
Interest Payable	$                        1
Income Tax Payable	$                        7
Total Current Liabilities		$                      41
Stockholder's Equity
Common Stock	$                    102
Retained Earnings	$                      28
Total Stockholder's Equity		$                    130
Total Liabilities & Stockholder's Equity		$                    171

Post Closing Trial Balance
Account Titles	Debit	Credit
Cash	$                      65
Accounts Receivable	$                      22
Supplies	$                      12
Land	$                        8
Equipment	$                      54
Accumulated Depreciation		$                      10
Software	$                      32
Accumulated Amortization		$                      12
Accounts Payable		$                      11
Notes Payable		$                      11
Salaries and Wages Payable		$                      11
Interest Payable		$                        1
Income Tax Payable		$                        7
Common Stock		$                    102
Retained Earnings		$                      28
Service Revenue		$                       -
Salaries and Wages Expense	$                       -
Depreciation Expense	$                       -
Amortization Expense	$                       -
Income Tax Expense	$                       -
Interest Expense	$                       -
Supplies expense	$                       -
Totals	$                    193	$                    193

Net Income = $19
Net Profit margin = $19/148 = 12.84%

Current Ratio = 99/41 = 2.41