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	$	3
Accounts Receivable		5
Supplies		12
Land		0
Equipment		58
Accumulated Depreciation				$	6
Software		16
Accumulated Amortization					7
Accounts Payable					5
Notes Payable (short-term)					0
Salaries and Wages Payable					0
Interest Payable					0
Income Tax Payable					0
Common Stock					68
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	$	94		$	94

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

Borrowed $12 cash on March 1 using a short-term note.

Purchased land on March 2 for future building site; paid cash, $9.

Issued additional shares of common stock on April 3 for $26.

Purchased software on July 4, $10 cash.

Purchased supplies on account on October 5 for future use, $18.

Paid accounts payable on November 6, $13.

Signed a $25 service contract on November 7 to start February 1, 2019.

Recorded revenues of $156 on December 8, including $38 on credit and $118 collected in cash.

Recognized salaries and wages expense on December 9, $83 paid in cash.

Collected accounts receivable on December 10, $22.

Data for adjusting journal entries as of December 31:

Unrecorded amortization for the year on software, $7.

Supplies counted on December 31, 2018, $10.

Depreciation for the year on the equipment, $6.

Interest of $1 to accrue on notes payable.

Salaries and wages earned but not yet paid or recorded, $12.

Income tax for the year was $8. It will be paid in 2019.

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

Answer 1

H&H Tools Inc

Closing entry –

No.	Account Titles and Explanation	Ref. No.			Debit			Credit
Dec 31, 18	Service Revenue				$156
	Income Summary							$156
	(To close service revenue account to income summary)
31-Dec-18	Income Summary		$137
	Depreciation Expense -Equipment					$7
	Amortization expense - software					$6
	Salaries and Wages Expense					$95
	Interest expense					$1
	supplies expense					$20
	Income tax expense					$8
	(To close all expenses accounts to income summary)
31-Dec-18	Income Summary			$19
	Retained Earnings						$19
	(To transfer net income to retained earnings account)

Computations –

1. Salaries and wages expense –

Cash paid$83

Salaries and wages expense = $95

1. Supplies expense –

Beg balance $12

Total $30

Ending bal.$10

Cost of supplies used = 30 – 10 = $20

Supplies expense = $20

Income statement

H&H Tools Inc
Income Statement
For the year ended December 31, 2018
Revenue	$156
Expenses
Salaries and wages expense	$95
Supplies expense	$20
Amortization expense	$7
Depreciation expense	$6
Interest expense	$1
income tax expense	$8
total expenses	$137
Net Income	$19

Post-Closing Trial Balance

H&H Tools Inc
Post-Closing Trial Balance (amount in thousands)
as on December 31, 2018
Account Titles	Debit	Credit
Cash	$66
Accounts Receivables	$21
Supplies	$10
Land	$9
Equipment	$58
Accumulated Depreciation		$12
Software	$26
Accumulated Amortization		$14
Accounts Payable		$10
Notes Payable (Short-term)		$12
Salaries and Wages Payable		$12
Interest Payable		$1
Income Tax Payable		$8
Common Stock		$94
Retained Earnings		$27
Totals	$190	$190

Computations:
Cash Accounts		Accounts Receivable
Beg balance	$3	Beg Balance	$5
Short-term note	$12	credit sales	$38
purchase of land	($9)	cash received	($22)
issue of shares	$26	Ending balance	$21
purchase of software	($10)
Accounts Payable paid	($13)	Accounts Payable
Revenue	$118	Beg Balance	$5
Salaries and wages expense	($83)	purchase of supplies	$18
Accounts Receivable	$22	cash paid	($13)
Ending Balance	$66	Ending balance	$10

Common stock –

Beg. Balance $68

New issue        $26

Ending bal.$94

Software –

Beg. Balance$16

Ending bal$26

Accumulated amortization –

Beg. Balance $7

Add: amortization expense$7

Ending balance $14

Accumulated Depreciation – equipment

Beginning balance $6

Add: depreciation expense$6

Ending balance$12

Retained Earnings –

Beginning balance $8

Add: net income$19

Ending balance $27