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	$	4
Accounts Receivable		4
Supplies		11
Land		0
Equipment		62
Accumulated Depreciation				$	7
Software		18
Accumulated Amortization					7
Accounts Payable					6
Notes Payable (short-term)					0
Salaries and Wages Payable					0
Interest Payable					0
Income Tax Payable					0
Common Stock					72
Retained Earnings					7
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	$	99		$	99

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

1. Borrowed $13 cash on March 1 using a short-term note.
2. Purchased land on March 2 for future building site; paid cash, $7.
3. Issued additional shares of common stock on April 3 for $25.
4. Purchased software on July 4, $12 cash.
5. Purchased supplies on account on October 5 for future use, $17.
6. Paid accounts payable on November 6, $14.
7. Signed a $30 service contract on November 7 to start February 1, 2019.
8. Recorded revenues of $164 on December 8, including $42 on credit and $122 collected in cash.
9. Recognized salaries and wages expense on December 9, $87 paid in cash.
10. Collected accounts receivable on December 10, $26.

Data for adjusting journal entries as of December 31:

11. Unrecorded amortization for the year on software, $7.
12. Supplies counted on December 31, 2018, $11.
13. Depreciation for the year on the equipment, $7.
14. Interest of $2 to accrue on notes payable.
15. Salaries and wages earned but not yet paid or recorded, $11.
16. Income tax for the year was $9. It will be paid in 2019.

1. 6-a. Prepare an income statement.

2. 6-b. Prepare the statement of retained earnings.

3. 6-c. Prepare the balance sheet.

Answer 1

6-a H&H Tool, Inc. income statement for the period ended December 31, 2018 revenues Service Revenue $ 164 total revenues $ 164 expense Salaries and Wages Expense Depreciation Expense Amortization Expense Income Tax Expense Interest Expense Supplies Expense total expenses net operating income $ 98 $7 $7 $9 $ 2 $ 17 $ 140 $ 24

6-b H & H Tool, Inc. statement of retained earnings for the period ended December 31, 2018 balance, january 1, 2018 $ 7 add: net operating income $ 24 balance, december 31, 2018 $ 31

6-C assets current assets Cash Accounts Receivable Supplies total current assets Land Equipment Accumulated Depreciation Software Accumulated Amortization total assets H & H Tool, Inc. balance sheet as at December 31, 2018 liabilities Accounts Payable $ 70 Notes Payable (short-term) $ 20 Salaries and Wages Payable $ 11 Interest Payable $ 101 Income Tax Payable $ 7 total liabilites stockholders' equity $ 48 Common Stock Retained Earnings $ 16 total stockholders' equity $ 172 total liabilities & stockholders' equity $ 9 $ 13 $ 11 $ 2 $ 9 $ 44 $ 62 $ 14 $ 30 $ 14 $97 $ 31 $ 128 $ 172

The statements given above is prepared from the adjusted trial balance given below -

x fc Account Titles Credit S 11 $ 14 H & H Tool, Inc. adjusted trial balance as at December 31, 2018 Account Titles Debit Cash $ 70 Accounts Receivable $ 20 Supplies Land Equipment S 62 Accumulated Depreciation Software S 30 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 $ 98 Depreciation Expense Amortization Expense Income Tax Expense $9 Interest Expense Supplies Expense $ 17 Totals S 340 $ 14 $9 $ 13 S 9 $ 97 $ 7 $ 164 $2 $ 340

The calculations for adjusted trial balance is given below -

X for Account Titles Credit = 7+7 H & H Tool, Inc. adjusted trial balance as at December 31, 2018 Account Titles Debit Cash =4+13-7+25-12-14+122-87+26 Accounts Receivable =4+42-26 Supplies =11+17-17 Land =0+7 Equipment =62 Accumulated Depreciation Software =18+12 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 |=0+87+11 Depreciation Expense =0+7 Amortization Expense =0+7 Income Tax Expense Interest Expense =0+2 Supplies Expense =0+17 Totals =SUM(C6:C27) =7+7 =6+17-14 =0+13 =0+11 =0+2 =0+9 = 72+25 =7 =0+164 =0+9 =SUM(D6:D27)

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