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		51
Accumulated Depreciation				$	5
Software		24
Accumulated Amortization					4
Accounts Payable					4
Notes Payable (short-term)					0
Salaries and Wages Payable					0
Interest Payable					0
Income Tax Payable					0
Common Stock					74
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	$	96		$	96

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 $33.
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 $142 on December 8, including $31 on credit and $111 collected in cash.
9. Recognized salaries and wages expense on December 9, $76 paid in cash.
10. Collected accounts receivable on December 10, $15.

Data for adjusting journal entries as of December 31:

11. Unrecorded amortization for the year on software, $4.
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, $11.
16. Income tax for the year was $7. It will be paid in 2019.

I. 1, 3, 5 and 8. Set up T-accounts for the accounts on the trial balance. Enter beginning balances and post the transactions (a)-(j), adjusting entries (k)-(p), and closing entry. (Enter your answers in thousands of dollars.)

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

III. Record the adjusting journal entries (k) through (p). (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in thousands of dollars.)

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

V. 1. 6-a. Prepare an income statement.

2. 6-b. Prepare the statement of retained earnings.

3. 6-c. Prepare the balance sheet.

VI. Prepare the closing journal entry. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in thousands of dollars.)

VII. Post the closing entry from requirement 7 and prepare a post-closing trial balance. (Enter your answers in thousands of dollars.)

VIII. 9-a. How much net income did H & H Tool, Inc., generate during 2018? What was its net profit margin?

1. 9-b. Is the company financed primarily by liabilities or stockholders’ equity?

2. 9-c. What is its current ratio?

Answer 1