Question

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):

Account Titles	Debit			Credit
Cash	$	4
Accounts Receivable		4
Supplies		11
Land		0
Equipment		68
Accumulated Depreciation				$	7
Software		24
Accumulated Amortization					8
Accounts Payable					6
Notes Payable (short-term)					0
Salaries and Wages Payable					0
Interest Payable					0
Income Tax Payable					0
Common Stock					83
Retained Earnings					7
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	$	111		$	111

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

1. Borrowed $13 cash on March 1 using a short-term note.
2. Purchased land on March 2 for future building site; paid cash, $7.
3. Issued additional shares of common stock on April 3 for $31.
4. Purchased software on July 4, $12 cash.
5. Purchased supplies on account on October 5 for future use, $17.
6. Paid accounts payable on November 6, $14.
7. Signed a $30 service contract on November 7 to start February 1, 2019.
8. Recorded revenues of $176 on December 8, including $48 on credit and $128 collected in cash.
1. Recognized salaries and wages expense on December 9, $93 paid in cash.
10. Collected accounts receivable on December 10, $32.

Data for adjusting journal entries as of December 31:

11. Unrecorded amortization for the year on software, $8.

50. Supplies counted on December 31, 2018, $11.

1000. Depreciation for the year on the equipment, $7.
14. Interest of $2 to accrue on notes payable.
15. Salaries and wages earned but not yet paid or recorded, $11.
16. Income tax for the year was $9. It will be paid in 2019.

C4-2 Part 3

3. Prepare an unadjusted trial balance. (Enter your answers in thousands of dollars.)

Answer 1

Solution

H & H Tool

Prepare an unadjusted trial balance:

H&H Tools
Unadjusted Trial Balance
for the year ended December 31, 2018
Account Titles	Debit	Credit
Cash	$82
Accounts Receivable	$20
Supplies	$28
Land	$7
Equipment	$68
Accumulated Depreciation		$7
Software	$36
Accumulated Depreciation		$8
Accounts Payable		$9
Notes Payable (Short-term)		$13
Common Stock		$114
Retained Earnings		$7
Service Revenue		$176
Salaries and Wages Expense	$93
Total	$334	$334

Computations:
Cash Accounts		Accounts Receivable
Beg balance	$4	Beg Balance	$4
Short-term note	$13	credit sales	$48
purchase of land	($7)	cash received	($32)
issue of shares	$31	Ending balance	$20
purchase of software	($12)
Accounts Payable paid	($14)	Accounts Payable
Revenue	$128	Beg Balance	$6
Salaries and wages expense	($93)	purchase of supplies	$17
Accounts Receivable	$32	cash paid	($14)
Ending Balance	$82	Ending balance	$9

Common stock –

Beg. Balance $83

New issue        $31

Ending bal.      $114

Supplies –

Beg. Balance = $11

Add: purchases = $17

Total supplies = $28

Software –

Beg. Balance = $24

Add: purchase of new software = $12

Ending balance = $36

Note: Unadjusted trial balance does not include adjustments and hence the salaries payable, interest payable, income tax payable, depreciation, supplies expense and amortization are not included in the unadjusted trial balance. These items form part of adjusted trial balance, which is drawn after providing the adjusting entries.