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		58
Accumulated Depreciation					$	6
Software		16
Accumulated Amortization						7
Accounts Payable						5
Notes Payable (short-term)						0
Salaries and Wages Payable						0
Interest Payable						0
Income Tax Payable						0
Common Stock						68
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	$	94			$	94

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 $26.
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 $156 on December 8, including $38 on credit and $118 collected in cash.
9. Recognized salaries and wages expense on December 9, $83 paid in cash.
10. Collected accounts receivable on December 10, $22.

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, $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.

REQUIREMENTS:

1. General Journal tab - Prepare the journal entries to record the transactions (a) through (j). Review the accounts as shown in the General Ledger and Trial Balance tabs. Then prepare the necessary adjusting entries (k) through (p) to correctly report net income for the period. Then record the closing entry as of December 31.

2. General Ledger tab - Each journal entry is posted automatically to the general ledger. Use the drop-down button to view the unadjusted, adjusted, or post-closing balances in the General Ledger.

3. Trial Balance tab - You may view either the unadjusted, adjusted, or post-closing trial balance by choosing from the drop-down.

4. Income Statement tab - Use the drop-down to select the accounts properly included on the income statement. The unadjusted, adjusted, or post-closing balances will appear for each account based on your selection.

5. Statement of Retained Earnings tab - Prepare the statement of retained earnings for the year ended December 31, 2018.

6. Balance Sheet tab - Use the drop-down to select the accounts to properly included on the balance sheet. The unadjusted, adjusted, or post-closing balances will appear for each account, based on your selection.

7. Analysis tab - Calculate the Net Profit Margin and Current Ratio.

Answer 1

H & H Tool, Inc. (Amount in '000) Journal Enteries Particulars Cash a/c To Note Payable (Being Note Payable issued) Debit in $ Credit in $ Date 1.3.2018 Dr. 12 12 Land a/c Dr,. 2.3.2018 9 То Cash (Being Land purchased in cash) Cash a/c 8.12.2018 Dr. 118 Accounts Receivable a/c Dr. 38 To service revenue 156 (Being Revenue earned in cash and credit) Cash a/c 3.4.2018 Dr. 26 To Common Stock 26 (Being Common Stock issued for cash) Salaries and wages expense a/c Dr. 9.12.2018 To Cash 83 (Being salaries and wages paid in cash) 10.12.2018 Cash a/c Dr. 22 To Accounts Receivable 22 (Being Cash received from debtors) Software a/c 4.7.2018 Dr. 10 То Cash 10 (Being Software purchased for cash) Accounts Payable a/c Dr. 6.11.2018 13 To Cash 13 (Being Accounts Payable paid in cash) 5.10.2018 Supplies a/c Dr. 18 To Accounts Payable 18 (Being Supplies purchased on account)

Adjusting Enteries Particulars Debit in $ Credit in $ Date 31.12.2018 Amortization on software a/c Dr. 7 To accumulated amortization 7 (Being amortization of software charged to Software) 31.12.2018 Supplies Expense a/c Dr. 20 To Supplies (Being Supplies expense charged to Supplies) 20 31.12.2018 Depreciation a/c Dr. 6 accumulated depreciation 6 (Being Depreciation on equipment charged to Equip.) 31.12.2018 Interest Expense a/c Dr. 1 To Interest Payable 1 (Being Interest accrued on Note Payable) 31.12.2018 Salaries and wages expense a/c Dr. To Salaries and wages payable 12 12 (Being Salary Expense accrued) 31.12.2018 Income tax expense a/c Dr. 8 To Income Tax Payable (Being Income tax accrued) Closing Enteries Particulars Debit in $ Credit in $ Date 31.12.2018 Income Summary a/c Dr. 145 To Salaries and wages expense 95 To Depreciation Expense 6 To Amortization Expense 7 To Income tax expense 16 To Interest Expense 1 To Supplies Expense 20 (Being expense accounts closed 31.12.2018 Service Revenue a/c Dr. 156 To Income Summary 156 Being Revenue accounts closed 31.12.2018 Income Summary a/c To Retained Earnings Dr. 11 11 (Being Income summary closed) LO

Adjusted Trial Balance For the period ending 31.12.2018 Post Closing Unadjusted Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ Adjustment Adjusted Particulars Cash 66 66 66 Accounts Receivable 21 21 21 Supplies 30 20 10 10 land 9 9 Equipment 58 58 58 Accumulated depreciation 12 6 6 Software 26 26 Accumulated Amortization 7 7 14 14 Accounts Payable 10 10 10 Notes Payable (short term) Salaries and wages payable 12 12 12 12 12 12 Interest Payable 1 1 Income Tax Payable 8 16 16 Common Stock 94 94 94 Retained Earning 8 8 19 Service revenue 156 156 Salaries and wages expense 83 12 95 Depreciation Expense 6 6 Amortization Expense 7 7 Income tax expense 8 16 Interest Expense 1 1 Supplies Expense 20 20 Totals 301 54 54 301 335 335 190 190 Net Income 11 Net profit margin Net Income/Sales 11/156 7.05% Debt to Equity Total Liabilities/Total Equity 51/113 45.13 % Since debt equity ratio is 45.13% the company is primarily financed by Equity Current Assets /Current Liabilities = 97/51 =1.90 Current Ratio 12 26 LD on

Statement of Income For the period ending 31.12.2018 156 Service revenue Less: Salaries and wages expense 95 Depreciation Expense 6 Amortization Expense 7 16 Income tax expense Interest Expense Supplies Expense 20 145 Net Income 11 Statement of Retained Earnings For the period ending 31.12.2018 1.1.2018 8 Net Income 11 19

Balance sheet As at 31.12.2018 Amounts in $ Amounts in $ Liabilities Amounts in $ Amounts in $ Assets Current Liabilities Current Assets Accounts Payable Cash 66 10 Notes Payable (short term) 97 Salaries and wages payable Interest Payable Accounts Receivable 21 12 Supplies 10 12 1 Income Tax Payable Non Current Assets 16 51 land 9 Shareholders equity Equipment 58 Accumulated deprecia 46 Common Stock -12 Retained Earning Software 26 19 113 Accumulated Amortiza -14 12 164 Total Liabilities & equity Total Assets 164