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):

Account Titles	Debit			Credit
Cash	$	4
Accounts Receivable		4
Supplies		11
Land		0
Equipment		50
Accumulated Depreciation				$	7
Software		23
Accumulated Amortization					5
Accounts Payable					6
Notes Payable (short-term)					0
Salaries and Wages Payable					0
Interest Payable					0
Income Tax Payable					0
Common Stock					67
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	$	92		$	92

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 $34.
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 $140 on December 8, including $30 on credit and $110 collected in cash.
9. Recognized salaries and wages expense on December 9, $75 paid in cash.
10. Collected accounts receivable on December 10, $14.

Data for adjusting journal entries as of December 31:

11. Unrecorded amortization for the year on software, $5.
12. Supplies counted on December 31, 2018, $11.
13. 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, $13.
16. Income tax for the year was $9. 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

	Unadjusted Entries		Adjustment		Adjusted
Account Titles	Debit	Credit	Debit	Credit	Debit	Credit
Cash	$                     4.00		$                                       63.00		$       67.00
Accounts Receivable	$                     4.00		$                                       16.00		$       20.00
Supplies	$                   11.00		$                                             -		$       11.00
Land	$                         -		$                                         7.00		$         7.00
Equipment	$                   50.00				$       50.00
Accumulated Depreciation		$        7.00		$         7.00		$       14.00
Software	$                   23.00		$                                       12.00		$       35.00
Accumulated Amortization		$        5.00		$         5.00		$       10.00
Accounts Payable		$        6.00	$                                       14.00	$       17.00		$         9.00
Notes Payable (short-term)		$            -		$       13.00		$       13.00
Salaries and Wages Payable		$            -		$       13.00		$       13.00
Interest Payable		$            -		$         2.00		$         2.00
Income Tax Payable		$            -		$       18.00		$       18.00
Common Stock		$      67.00		$       34.00		$     101.00
Retained Earnings		$        7.00				$         7.00
Service Revenue	$                         -			$     140.00		$     140.00
Salaries and Wages Expense	$                         -		$                                       88.00		$       88.00
Depreciation Expense	$                         -		$                                         7.00		$         7.00
Amortization Expense	$                         -		$                                         5.00		$         5.00
Income Tax Expense	$                         -		$                                       18.00		$       18.00
Interest Expense	$                         -		$                                         2.00		$         2.00
Supplies Expense	$                         -		$                                       17.00		$       17.00
Totals	92.00	92.00	249.00	249.00	327.00	327.00
H & H tool
Income statement
For the period ending Dec 31, 2018
Service revenue		$         140
Expenses:
Salaries and Wages Expense	$                        88
Depreciation Expense	$                          7
Amortization Expense	$                          5
Interest Expense	$                          2
Supplies Expense	$                        17
Income tax expenses	$                        18
Total expenses		$         137
Net Income		$             3
Statement of retained earnings
For the period ending Dec 31, 2018
Opening balance	$                          8
Add: Net Income	$                        23
Closing balance	$                        31
H & H tool
Balance sheet
31-Dec-18
Assets	Amount in Thousands	Equity and liabilities	Amount in Thousands
Current assets			Current liabilities
Cash	$                        67		Accounts Payable	$              9
Accounts Receivable	$                        20		Notes Payable (short-term)	$            13
Supplies	$                        11		Salaries and Wages Payable	$            13
Total Current Assets		$           98	Interest Payable	$              2
Non-current assets			Income Tax Payable	$            18
Land	$                          7		Total Current Liabilities		$            55
Equipment, Net (50 - 14)	$                        36		Equity
Software, Net (35 - 10)	$                        25		Common Stock	$          101
Total Non Current Assets		$           68	Retained Earnings	$            10	$          111
Total Assets		$         166	Total Equity and liabilities		$          166