Question

Required information C4-2 From Recording Transactions (Including Adjusting Journal Entries) to Preparing Financial Statements and Closing Journal Entries (Chapters 2, 3, and 4) (LO 2-3, LO 3-3, LO 4-1, LO 4-2, LO 4-3, LO 4-4, LO 4-5, LO 4-6) (The following information applies to the questions displayed below.) 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): Credit Debit $ 4 4 11 0 59 $ 7 14 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 OOOOO 66 7 0 0 0 0 0 0 $92 $92

Answer 1

9.A.

Net Income	$ 21,000
Net Profit Margin	13.3 %

9.B. Stockholders Equity

The company is financed primarily by stockholders equity.

Total stockholders equity = Common stock + Retained Earnings = $ 91 + $ 28 = $ 119

Total liabilities = Accounts Payable + Notes Payable + Salaries and Wages Payable + Interest Payable + Income Taxes Payable = $ 9 + $ 13 + $ 12 + $ 2 + $ 9 = $ 45

Debt ratio = $ 45 / $ (45 + 119)  = 27.4 %

Only 27.4 % of the assets are financed by debt, while 72.6 % is financed by stockholders equity.

9. C.

Current Ratio
Numerator	Total Current Assets	=	$ 98,000	=	2.18
Denominator	Total Current Liabilities	=	$ 45,000

Current Assets:

Cash	$ 67,000
Accounts Receivable	20,000
Supplies	11,000
Total Current Assets	$ 98,000

Current Liabilities:

Accounts Payable	$ 9,000
Salaries and Wages Payable	12,000
Interest Payable	2,000
Income Taxes Payable	9,000
Notes Payable	13,000
Total Current Liabilities	$ 45,000