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Brothers Harry and Herman Hausyerday began operations of their machine shop (H & H Tool, Inc.)...

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 $ 3
Accounts Receivable 5
Supplies 12
Land 0
Equipment 69
Accumulated Depreciation $ 6
Software 24
Accumulated Amortization 4
Accounts Payable 5
Notes Payable (short-term) 0
Salaries and Wages Payable 0
Interest Payable 0
Income Tax Payable 0
Common Stock 90
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 $ 113 $ 113

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

  1. Borrowed $12 cash on March 1 using a short-term note.
  2. Purchased land on March 2 for future building site; paid cash, $9.
  3. Issued additional shares of common stock on April 3 for $23.
  4. Purchased software on July 4, $10 cash.
  5. Purchased supplies on account on October 5 for future use, $18.
  6. Paid accounts payable on November 6, $13.
  7. Signed a $25 service contract on November 7 to start February 1, 2019.
  8. Recorded revenues of $178 on December 8, including $49 on credit and $129 collected in cash.
  9. Recognized salaries and wages expense on December 9, $94 paid in cash.
  10. Collected accounts receivable on December 10, $33.

Data for adjusting journal entries as of December 31:

  1. Unrecorded amortization for the year on software, $4.
  2. Supplies counted on December 31, 2018, $10.
  3. Depreciation for the year on the equipment, $6.
  4. Interest of $1 to accrue on notes payable.
  5. Salaries and wages earned but not yet paid or recorded, $12.
  6. Income tax for the year was $8. 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.

Solutions

Expert Solution

Income Statement
Service Revenue $        178.00
Expenses
Salaries and Wages Expense $        106.00
Depreciation Expense $            6.00
Amortization Expense $            4.00
Income Tax Expense $            8.00
Interest Expense $            1.00
Supplies Expense $          20.00
Total Expenses $           145.00
Net Income $             33.00
Statement of Retained Earnings
Beginning Balance $            8.00
Add Net Income $          33.00
$          41.00
Less Dividend $               -  
Ending Balance $          41.00
Balance Sheet
Assets
Current Assets
Cash $          74.00
Accounts Receivable $          21.00
Supplies $          10.00
Total Current Assets $        105.00
Property Plant and Equipment
Land $            9.00
Equipment $          69.00
   Less : Accumulated Depreciation $         -12.00
Total Property Plant and Equipment $          66.00
Intangible Assets
Software $          34.00
   Less : Accumulated Amortization $          -8.00 $          26.00
Total Assets $        197.00
Liabilities & Stockholder's Equity
Current Liabilities
Accounts Payable $          10.00
Notes Payable (short-term) $          12.00
Salaries and Wages Payable $          12.00
Interest Payable $            1.00
Income Tax Payable $            8.00
Total Current Liabilities $          43.00
Stockholder's Equity
Common Stock $        113.00
Retained Earnings $          41.00
Total Stockholder's Equity $        154.00
Total Liabilities & Stockholder's Equity $        197.00

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