Question

Brothers Harry and Herman Hausyerday began operations of their machine shop (H & H Tool, Inc.) on January 1, 2013. The annual reporting period ends December 31. The trial balance on January 1, 2015, 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		60
Accumulated Depreciation				$	6
Software		15
Accumulated Amortization					5
Accounts Payable					5
Notes Payable (short-term)					0
Salaries and Wages Payable					0
Interest Payable					0
Income Tax Payable					0
Common Stock					71
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	$	95		$	95

Transactions during 2015 (summarized in thousands of dollars) follow:
1.	Borrowed $12 cash on a six-month note payable dated March 1, 2015.
2.	Purchased land for future building site; paid cash, $9.
3.	Earned revenues for 2015, $160, including $40 on credit and $120 collected in cash.
4.	Issued additional shares of stock for $3.
5.	Recognized salaries and wages expense for 2015, $85 paid in cash.
6.	Collected accounts receivable, $24.
7.	Purchased software, $10 cash.
8.	Paid accounts payable, $13.
9.	Purchased supplies on account for future use, $18.
10.	Signed a $25 service contract to start February 1, 2016.
Data for adjusting journal entries:
11.	Unrecorded amortization for the year on software, $5.
12.	Supplies counted on December 31, 2015, $10.
13.	Depreciation for the year on the equipment, $6.
14.	Accrued interest of $1 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 2016.

1. Record Journal entries for 1-10.

2. Set up T accounts for the accounts on the trial balance. include beginning balances, transactions 1-10, adjusting entries 11-16, and closing entry for these following accounts: cash, accounts receivable, supplies, land, equipment, accumulated depreciation, software, accumulated amortization, accounts payable, note payable, salaries and wages payable, interest payable, income tax payable, common stock, retained earnings, service revenue, depreciation expense, amortization expense, income tax expense, interest expense, salaries and wages expense, supplies expense

3. prepare an unadjusted trial balance

4. record adjusting journal entries 11-16

5. post adjusting entries from #4, and prepare an adjusted trial balance

6a. prepare an income statement

6b. prepare statement of retained earnings

6c. prepare balance sheet

7. prepare closing journal entry - record entry to close revenue and expense accounts to retain earnings

8. post closing entry from #7 and prepare a post-closing trial balance

Answer 1

Since, there are multiple parts to the question, I have answered 1, 2, 3, 4 and 7 (as T-Accounts can be setup only after the closing entry has been prepared and accounted for). Part 5 is also completed partially as the adjusting entries have been posted to T-Accounts in Part 2.

_____

Part 1)

The journal entries are provided as below:

Transaction	Account Titles	Debit	Credit
1	Cash	$12
	Notes Payable (Short Term)		$12
2	Land	$9
	Cash		$9
3	Cash	$120
	Accounts Receivable	$40
	Service Revenue		$160
4	Cash	$3
	Common Stock		$3
5	Salaries and Wages Expense	$85
	Cash		$85
6	Cash	$24
	Accounts Receivable		$24
7	Software	$10
	Cash		$10
8	Accounts Payable	$13
	Cash		$13
9	Supplies	$18
	Accounts Payable		$18
10	No Journal Entry Required

_____

Part 2)

The T-Accounts are set up as below:

Cash
Beg. Bal.	3	9	2
1	12	85	5
3	120	10	7
4	3	13	8
6	24
End. Bal.	$45

____

Accounts Receivable
Beg. Bal.	5	24	6
3	40
End. Bal.	$21

____

Supplies
Beg. Bal.	12	20	12
9	18
End. Bal.	$10

____

Land
Beg. Bal.	0
2	9
End. Bal.	$9

____

Equipment
Beg. Bal.	60
End. Bal.	$60

____

Accumulated Depreciation - Equipment
		6	Beg. Bal.
		6	13
		$12	End. Bal.

____

Software
Beg. Bal.	15
7	10
End. Bal.	$25

____

Accumulated Amortization - Software
		5	Beg. Bal.
		5	11
		$10	End. Bal.

____

Accounts Payable
8	13	5	Beg. Bal.
		18	9
		$10	End. Bal.

____

Notes Payable
		0	Beg. Bal.
		12	1
		$12	End. Bal.

____

Salaries and Wages Payable
		0	Beg. Bal.
		12	15
		$12	End. Bal.

____

Interest Payable
		0	Beg. Bal.
		1	14
		$1	End. Bal.

____

Income Tax Payable
		0	Beg. Bal.
		8	16
		$8	End. Bal.

____

Common Stock
		71	Beg. Bal.
		3	4
		$74	End. Bal.

____

Retained Earnings
		8	Beg. Bal.
		23	CE1
		$31	End. Bal.

____

Service Revenue
		0	Beg. Bal.
CE1	160	160	3
		$0	End. Bal.

____

Amortization Expense
Beg. Bal.	0
11	5	5	CE1
End. Bal.	$0

____

Depreciation Expense
Beg. Bal.	0
13	6	6	CE1
End. Bal.	$0

____

Income Tax Expense
Beg. Bal.	0
16	8	8	CE1
End. Bal.	$0

____

Interest Expense
Beg. Bal.	0
14	1	1	CE1
End. Bal.	$0

____

Salaries and Wages Expense
Beg. Bal.	0
5	85
15	12	97	CE1
End. Bal.	$0

____

Supplies Expense
Beg. Bal.	0
12	20	20	CE1
End. Bal.	$0

_____

Part 3)

The unadjusted trial balance is prepared as follows:

H&H TOOL, INC.
Unadjusted Trial Balance
At December 31, 2015
(in thousands)
Account Titles	Debit	Credit
Cash	45
Accounts Receivable	21
Supplies	30
Land	9
Equipment	60
Accumulated Depreciation		6
Software	25
Accumulated Amortization		5
Accounts Payable		10
Notes Payable (Short-Term)		12
Salaries and Wages Payable
Interest Payable
Income Taxes Payable
Common Stock		74
Retained Earnings		8
Service Revenue		160
Salaries and Wages Expense	85
Supplies Expense
Depreciation Expense
Interes Expense
Income Tax Expense
Totals	$275	$275

_____

Part 4)

The adjusting entries are prepared as follows:

Transaction	Account Titles	Debit	Credit
11	Amortization Expense	$5
	Accumulated Amortization		$5
12	Supplies Expense	$20
	Supplies		$20
13	Depreciation Expense	$6
	Accumulated Depreciation		$6
14	Interest Expense	$1
	Interest Payable		$1
15	Salaries and Wages Expense	$12
	Salaries and Wages Payable		$12
16	Income Tax Expense	$8
	Income Tax Payable		$8

_____

Part 7)

The closing entry is given as below:

Transaction	Account Titles	Debit	Credit
CE1	Service Revenue	$160
	Salaries and Wages Expense (85+12)		$97
	Supplies Expense		$20
	Depreciation Expense		$6
	Amortization Expense		$5
	Income Tax Expense		$8
	Interest Expense		$1
	Retained Earnings		$23