Question

6.

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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	$	2
Accounts Receivable		6
Supplies		13
Land		0
Equipment		67
Accumulated Depreciation				$	5
Software		21
Accumulated Amortization					7
Accounts Payable					4
Notes Payable (short-term)					0
Salaries and Wages Payable					0
Interest Payable					0
Income Tax Payable					0
Common Stock					84
Retained Earnings					9
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	$	109		$	109

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

1. Borrowed $11 cash on March 1 using a short-term note.
2. Purchased land on March 2 for future building site; paid cash, $8.
3. Issued additional shares of common stock on April 3 for $30.
4. Purchased software on July 4, $11 cash.
5. Purchased supplies on account on October 5 for future use, $19.
6. Paid accounts payable on November 6, $12.
7. Signed a $20 service contract on November 7 to start February 1, 2019.
8. Recorded revenues of $174 on December 8, including $47 on credit and $127 collected in cash.
9. Recognized salaries and wages expense on December 9, $92 paid in cash.
10. Collected accounts receivable on December 10, $31.

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, $12.
13. Depreciation for the year on the equipment, $5.
14. Interest of $1 to accrue on notes payable.
15. Salaries and wages earned but not yet paid or recorded, $13.
16. Income tax for the year was $7. 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

Answers :-

6-a

Income Statement
Particulars	Amount
Revenues	174
Less : Expenses
Salaries and Wages Expense	13
Depreciation	5
Amortization	5
Income Tax Expense	7
Interest Expense	1
Supplies Expense	19
Net Income	124

6-b

Statement of Retained Earnings
Particulars	Amount	Particulars	Amount
Salaries and Wages expenses	13	Beg. Bal.	9
Depreciation Expense	5	Service Revenue	174
Amortization Expense	5
Income Tax Expense	7
Interest Expense	1
Supplies Expense	19
End. Balance-	133
	183		183

6-c

Balance Sheet as on December 31,2018
ASSETS	$	LIABILITIES	$
Current Assets		Current Liabilities
Cash	173	Accounts payable	12
Accounts receivable	6	Salaries and wages payable	13
Supplies	13	Interest payable	1
Total Current Assets	192	Income tax payable	7
		Total Current liabilities	33
Property Plant and Equipment
Land	8	Long Term Liabilities
Equipment    67 Less: Accumulated Depreciation(3)	64	Notes Payable	11
Net PP&E	72	STOCKHOLDER'S EQUITY
Intangible Assets:		Common Stock	117
		Retained earnings	133
Intangible Assets:		Total Stockholder's Equity	250
Software 35 Less: Accumulated Amortization(5)	30
Total Intangible assets	30
Total	294	Total	294