Question

we PIUUI VULTUUR 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: Debit Credit Account Titles Cash Accounts Receivable Supplies Land Equipment Accumulated Depreciation Software Accumulated Amortization Accounts Payable Notes Payable (short-tern) 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 $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. Pald accounts payable on November 6. $14. 9. 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 Recognized salaries and wages expense on December 9, $87 paid in cash J. Collected accounts recelvable on December 10, $26. Data for adjusting journal entries as of December 31 k. Unrecorded amortization for the year on software, $7. Supplies counted on December 31, 2018, 911 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 59. It will be paid in 2019.

Answer 1

H & H Tool, Inc. (Amount in '000) Debit in $ Credit in $ Journal Enteries Date Particulars 1.3.2018 Cash a/c Dr. To Note Payable (Being Note Payable issued) 2.3.2018 Land a/c Dr. To Cash (Being Land purchased in cash) 8.12.2018 Cash a/c Dr. Accounts Receivable a/c Dr. To service revenue (Being Revenue earned in cash and credit) 3.4.2018 Cash a/c Dr. To Common Stock (Being Common Stock issued for cash) 9.12.2018 |Salaries and wages expense a/c Dr. To Cash (Being salaries and wages paid in cash) 10.12.2018 Cash a/c Dr. To Accounts Receivable (Being Cash received from debtors) 4.7.2018 Software a/c Dr. To Cash (Being Software purchased for cash) 12 6.11.2018 Accounts Payable a/c Dr. To Cash (Being Accounts Payable paid in cash) 14 5.10.2018 Supplies a/c Dr. To Accounts Payable (Being Supplies purchased on account)

Adjusting Enteries Date Particulars Debit in $ Credit in $ 31.12.2018 Amortization on software a/c Dr. To accumulated amortization |(Being amortization of software charged to Software) 31.12.2018 Supplies Expense a/c Dr. To Supplies (Being Supplies expense charged to Supplies) 17 Dr. 31.12.2018 Depreciation a/c To accumulated depreciation |(Being Depreciation on equipment charged to Equip.) 7 31.12.2018 Interest Expense a/c Dr. To Interest Payable |(Being Interest accrued on Note Payable) 31.12.2018 Salaries and wages expense a/c Dr. To Salaries and wages payable (Being Salary Expense accrued) Dr. 31.12.2018 Income tax expense a/c To Income Tax Payable (Being Income tax accrued) Closing Enteries Date Particulars Debit in $Credit in $ 31.12.2018 Income Summary a/c Dr. 149 To Salaries and wages expense 98 To Depreciation Expense To Amortization Expense To Income tax expense 18 To Interest Expense To Supplies Expense 17 (Being expense accounts closed 31.12.2018 Service Revenue a/c Dr. To Income Summary Being Revenue accounts closed 164 31.12.2018 Income Summary a/c Dr. To Retained Earnings (Being Income summary closed)

Adjusted Trial Balance For the period ending 31.12.2018 Unadjusted Adjustment Adjusted Post Closing Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ 70 20 17 14 Particulars 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 Earning Service revenue Salaries and wages expense Depreciation Expense Amortization Expense Income tax expense Interest Expense Supplies Expense Totals 164 164 87 313 313 53 53 349 349 200 200 Net Income Net profit margin = Net Income / Sales = 15/164 = 9.15% Debt to Equity = Total Liabilities/Total Equity = 53/119 = 44.54% Since debt equity ratio is 44.54% the company is primarily financed by Equity Current Ratio = Current Assets / Current Liabilities = 101/53 = 1.91

164 Statement of Income For the period ending 31.12.2018 Service revenue Less: Salaries and wages expense Depreciation Expense Amortization Expense Income tax expense Interest Expense Supplies Expense Net Income 149 15 Statement of Retained Earnings For the period ending 31.12.2018 1.1.2018 Net Income

Amounts in $ Amounts in $ Balance sheet As at 31.12.2018 Assets Amounts in $ Amounts in $ Liabilities Current Assets Current Liabilities Cash Accounts Payable Accounts Receivable Notes Payable (short term) Supplies 101 Salaries and wages payable Interest Payable Non Current Assets Income Tax Payable land Equipment Shareholders equity Accumulated deprecia 48 Common Stock Software Retained Earning Accumulated Amortiza -14 16 Total Assets 172 Total Liabilities & equity 53 -14 119 172

Notes Payable (short term) Cash Bal. 13 13 Notes Payable (shor Service revenue Common Stock Accounts Receivable Cash 4 land 13 Salaries and wages ex 122 Software 25 Accounts Payable 26 Bal 190 Salaries and wages payable Salaries and wages e 11 Bal Accounts Receivable 4 Cash Bal. Service revenue Interest Payable Interest Expense Bal 46 INI Income Tax Payable Income tax expense 9 Bal. Accounts Payable Supplies 11 Supplies Expense 17 Bal 28 Bal Common Stock Land Bal 72 25 Bal. Bal 97 Cash Bal 97 Equipment Retained Earning Bal 22 Income Summary Bal. 15 Bal 22 22

Accumulated depreciation Bal 14 Depreciation Expense Bal. 14 Software Bal. Cash 12 Bal 30 30 Accumulated Amortization Bal. 14 Amortization Expense Bal 14 Cash Accounts Payable 14 Bal. Supplies Bal 23