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-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 $99 $99 Transactions and events during 2018 (summarized in thousands of dollars) follow: a. Borrowed $13 cash on March 1 using a short-term note. b. Purchased land on March 2 for future building site; paid cash, $7. c. Issued additional shares of common stock on April 3 for $25. d. Purchased software on July 4, $12 cash. e. Purchased supplies on account on October 5 for future use, $17. f. Paid accounts payable on November 6, $14. g. Signed a $30 service contract on November 7 to start February 1, 2019 h. Recorded revenues of $164 on December 8, including $42 on credit and $122 collected in cash. 1. Recognized salaries and wages expense on December 9, $87 paid in cash. J. Collected accounts receivable on December 10, $26. Data for adjusting journal entries as of December 31: k. Unrecorded amortization for the year on software, $7. 1. Supplies counted on December 31, 2018, $11. m. Depreciation for the year on the equipment, $7. n. Interest of $2 to accrue on notes payable. o. Salaries and wages earned but not yet paid or recorded, $11. p. Income tax for the year was $9. It will be paid in 2019.

Answer 1

Requirement 5: Prepare the following adjusted trial balance

НHT Inc Adjusted Trial Balance December 31, 2018 Amounts In Thous ands Account Title Debit Credit $70 Cash Accounts Receivable $20 $11 Supplies Land $7 $62 Equipment Accumulated Depreciation-Equipment $14 Software $30 $14 Accumulated Amortization-Software Accounts Payable Notes Payable-Short Term Salaries and Wages Payable Interest Payable Income Tax Payable $9 $13 $11 $2 $9 $97 Common Stock Retained Earnings $7 Service Revenue $164 Salaries and Wages Expense Depreciation Expense Amortization Expense Income Tax Expense Interest Expense Supplies Expense $98 $7 $7 $9 $2 $17 Total $340 $340

Requirement 6A, 6B and 6C: Prepare income statement, statement of retained earnings and balance sheet as follows

НHT Inc Income Statement For the Year Ended December 31, 2018 Service Revenue $164 Salaries and Wages Expense $98 Supplies expense $17 Depreciation Expense Amortization Expense $7 $7 Total Operating Expenses Income from operations Other Income/ (Expenses) $129 $35 Interest Expense (S2) Income before income tax $33 Income tax expense $9 Net Income $24 ННT Inc Statement of Retained Eanings For the Year Ended December 31, 2018 Beginning Balance $7 Deduct Net Income $24 Ending Balance S31 НHT Inc Balance sheet December 31, 2018 Assets Current Assets: Cash $70 Accounts Receivable $20 Supplies s11 Total Current Assets $101 Property, Plant and Equipment Land $7 Equipment Deduct: Accumulated Depreciation - Equipment $62 (S14) S48 Software $30 $16 $172 Deduct: Accumulated Amortization Software ($14) Total Assets Liabilities and Stockholders' Equity Current Liabilities: $9 Accounts Payable Notes Payable-Short Term Salaries and Wages Payable S13 $11 Interest Payable Income Tax Payable $2 S9 $44 Total Current Liabilities Noncurrent Liabilities Total Liabilities $44 Stockholders' Equity Common Stock $97 Retained Earnings Total Stockholders' Equity Total Liabilities and Stockholders' Equity $31 $128 $172

Requirement 7: Prepare the following closing entry

Date	Account Title and Explanation	Debit	Credit
Dec. 31	Service Revenue	$164
	Salaries and Wages Expense		$98
	Depreciation Expense		$7
	Amortization Expense		$7
	Income Tax Expense		$9
	Interest Expense		$2
	Supplies Expense		$17
	Retained Earnings		$24
	To close expenses and revenues to retained earnings

Requirement 8: Prepare the following post closing trial balance

HHT Inc
Post-Closing Trial Balance
December 31, 2018
Account Title	Debit	Credit
Cash	$70
Accounts Receivable	$20
Supplies	$11
Land	$7
Equipment	$62
Accumulated Depreciation-Equipment		$14
Software	$30
Accumulated Amortization-Software		$14
Accounts Payable		$9
Notes Payable-Short Term		$13
Salaries and Wages Payable		$11
Interest Payable		$2
Income Tax Payable		$9
Common Stock		$97
Retained Earnings		$31
Total	$200	$200

Requirement 9A: Determine net income and compute net profit margin as follows

Net income = $24

Net Profit margin = Net income ÷ Service revenue

= $24 ÷ 164

= 14.6%

Requirement 9b: The company primarily financed by stockholders' equity

Requirement 9c: Compute current ratio as follows

Current ratio = Current assets ÷ current liabilities

= $101 ÷ $44

= 2.30

Notes: Worksheet

ННT Inc Work Sheet For the Year Ended December 31, 2018 Unadjusted Trial Balance Credit Adjustments Debit Adjusted Trial Balance Income Statement Balance Sheet Account Title Debit Credit Debit Credit Credit Debit Credit Debit Cash $70 $70 $70 Accounts Receivable $20 $20 $20 Supplies $28 1 $17 $11 $11 $7 $7 Land $7 Equipment $62 $62 $62 Accumulated Depreciation-Equipment $14 $14 $7 $7 m Software $30 $30 $30 $7 S14 Accumulated Amortization-Software k $7 $14 Accounts Payable $9 $9 $9 $13 Notes Payable-Short Term Salaries and Wages Payable $13 $13 $0 $11 $11 $11 Interest Payable S0 $2 $2 $2 Income Tax Payable S0 $9 $9 $9 р Common Stock $97 $97 $97 Retained Earnings $7 $7 $7 $164 $164 $164 Service Revenue Salaries and Wages Expense $11 $98 $87 $98 Depreciation Expense Amortization Expense Income Tax Expense Interest Expense S0 S7 $7 $7 $7 $7 $0 k $7 S0 $9 $9 $9 p $2 $2 $0 $2 Supplies Expense S0 $17 $17 1 $17 Total S304 S304 S53 $53 S340 S340 $140 $164 $200 $176 Net Loss $24 s164 $24 $200 Totals s164 $200