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	$	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.

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

1. H & H TOOL, INC.Unadjusted Trial Balance(in thousands)

Account Titles Debit Credit

Cash

Accounts

Receivable

Supplies

Land

Equipment

Accumulated Depreciation

Software

Accumulated Amortization

Accounts Payable

Notes Payable (short–term)

Salaries and Wages Payable

Interest Payable

Income Taxes Payable

Common Stock

Retained Earnings

Service Revenue

Salaries and Wages Expense

Supplies Expense

Depreciation Expense

Interest Expense

Income Tax Expense

Totals

2. Post the adjusting entries from requirement 4 and prepare an adjusted trial balance.

H & H TOOL, INC.Adjusted Trial Balance(in thousands)

Account Titles Debit Credit

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 Earnings

Service Revenue

Salaries and Wages Expense

Supplies Expense

Depreciation Expense

Amortization Expense

Interest Expense

Income Tax Expense

Total

3.

1. Prepare an income statement.

2. Prepare the statement of retained earnings.

3. Prepare the balance sheet.

Answer 1

Required 1 :
H & H TOOL , INC.
Unadjusted Trial Balances (In Thousands )
Account Titles	Debit	Credit
Cash (Note 1 Below )	$ 98
Accounts receivable (6 +47 -31 )	$ 22
Supplies (13 +19 )	$ 32
Land	$ 8
Equipment	$ 67
Accumulated Depreciation		$ 5
Software (21 +11 )	$ 32
Accumulated Amortization		$ 7
Accounts Payable ( 4+19-12)		$ 11
Notes Payable (short term )		$ 11
Salaries and wages payable		$ 0
Interest Payable		$ 0
Income tax payable		$ 0
Deferred revenue		$ 20
Common stock (84 +30 )		$ 114
Retained Earnings		$ 9
Service Revenue		$ 174
Depreciation Expense	$ 0
Amortization Expense	$ 0
Salaries and wages Expense	$ 92
Supplies Expense	$ 0
Interest Expense	$ 0
Income Tax expense	$ 0
Totals	$ 351	$ 351

Note 1 :

Cash
Beg. Bal.	$ 2
a)	$ 11	$ 8	b)
c)	$ 30	$ 11	d)
g)	$ 20	$ 12	f)
h)	$ 127	$ 92	i)
j)	$ 31
End. Bal.	$ 98

Required 2 :
Adjustments Entries :
Trasaction	General journal	Debit	Credit
k)	Amortization expense	$ 7
	Accumulated amortization		$ 7
	(To record Amortization expense )
L)	Supplies expense (13 +19 -12)	$ 20
	Supplies		$ 20
	(To record Supplies Expenses )
m)	Depreciation expense	$ 5
	Accumulated depreciation		$ 5
	(To record Depreciation Expense )
n)	Interest expense	$ 1
	Interest payable		$ 1
	(To record Accrued Interest on Note )
o)	Salaries and wages expense	$ 13
	Salaries and wages payable		$ 13
	(To record Salaries incurred but not paid )
p)	Income tax expense	$ 7
	Income tax payable		$ 7
	(To record Income tax Expense )

H & H TOOL , INC.
Adjusted Trial Balances (In Thousands )
Account Titles	Debit	Credit
Cash (Note 1 Above )	$ 98
Accounts receivable (6 +47 -31 )	$ 22
Supplies (13 +19 -20)	$ 12
Land	$ 8
Equipment	$ 67
Accumulated Depreciation (5 +5 )		$ 10
Software (21 +11 )	$ 32
Accumulated Amortization ( 7+ 7 )		$ 14
Accounts Payable ( 4+19-12)		$ 11
Notes Payable (short term )		$ 11
Salaries and wages payable		$13
Interest Payable		$ 1
Income tax payable		$ 7
Deferred revenue		$ 20
Common stock (84 +30 )		$ 114
Retained Earnings		$ 9
Service Revenue		$ 174
Depreciation Expense	$ 5
Amortization Expense	$ 7
Salaries and wages Expense (92+ 13 )	$ 105
Supplies Expense	$ 20
Interest Expense	$ 1
Income Tax expense	$ 7
Totals	$ 384	$ 384

Required 3 C :

Required 3 A :
H & H TOOL , INC.
Income Statement
For the Year Ended December 31
Revenues :
Sales Revenue	$ 174
Expenses :
Depreciation Expense	$ 5
Amortization Expense	$ 7
Salaries and wages Expense (92+ 13 )	$ 105
Supplies Expense	$ 20
Interest Expense	$ 1
Income Tax expense	$ 7
Total Expenses	$ 145
Net Income ($174 -$145 )	$ 29

Required 3 B :
H & H TOOL , INC.
Retained Earnings
For the Year Ended December 31
Retained earnings at Beginning (Jan 1 ,2018)	$ 9
Add; Net Income (See Required 3 A )	$ 29
Retained earnings at End (Dec 31 ,2018)	$ 38

Required 3 C :
H & H TOOL , INC.
Balance Sheet
For the Year Ended December 31
Assets :
Currents assets :
Cash (Note 1 Above )		$ 98
Accounts receivable (6 +47 -31 )		$ 22
Supplies (13 +19 -20)		$ 12
Total Current assets			$ 132
Property , Plant and Equipment :
Land		$ 8
Equipment	$ 67
Less : Accumulated Depreciation	($10)	$ 57
SoftWare (21 +11 )	$ 32
Less: Accumulated Amortization ( 7+ 7 )	($14 )	$ 18	$ 83
Total Assets			$ 215
Liabilities and Shareholders' equity
Current Liabilities :
Accounts Payable ( 4+19-12)		$ 11
Notes Payable (short term )		$ 11
Salaries and wages payable		$13
Interest Payable		$ 1
Income tax payable		$ 7
Deferred revenue		$ 20
Total Current ratio			$ 63
Shareholders' Equity :
Common stock (84 +30 )		$ 114
Retained Earnings (See Required 3 B )		$ 38
Total Shareholders' Equity			$ 152
Total Liabilities and Stockholders' Equity			$ 215