Question

Brothers Anthony and Christopher Gaber began operations of thier tool and die shop (A & C Tools Inc.) on January 1, 2016. The company's fiscal year ends on December 31. The trial balance on January 1, 2017, was as follows:

Account No.	Account Titles	Debit	Credit
01	Cash	$3,000
02	Account receivable	5,000
03	Service supplies inventory	12,000
04	Land
05	Equipment	60,000
06	Accumulated depreciation (equipment)		$6,000
07	Other assets (not detailed, to simplify)	4,000
11	Account payable		5,000
12	Notes payable
13	Wages payable
14	Interest payable
15	Income tax payable
21	Contributed capital (65,000 Shares)		65,000
31	Retained earnings		8,000
35	Service revenue
40	Depreciation expense
41	Income tax expense
42	Interest expense
43	Other expenses
	Totals	$84,000	$84,000

Transactions and events during 2017 are as follows:

a. Borrowed $10,000 cash on a 6 percent note payable, dated March 1, 2017.

b. Purchased land for future building site; paid cash, $9,000.

c. Earned revenues for 2017 of $160,000, including $50,000 on credit.

d. Sold 3,000 additional shares for $1 cash per share.

e. Recognised other expenses for 2017, $85,000, including $20,000 on credit.

f. Collected accounts receivable, $24,000.

g. Purchased additional assets, $10,000 cash (debit other assets account).

h. Paid accounts payable, $13,000.

i. Purchased service supplieson on account, $18,000 (debit to Account No. 03).

j. Signed a $25,000 service contract to start February 1, 2018.

k. Declared and paid cash dividend, $15,000.

    Data for adjusting enteriesare as follows:

l. Service supplies inventory on hand at December 31, 2017, $12,000 (debit other expenses account).

m. Depreciation on the equipment estimated at $6,000 per year.

n. Accrued interest on notes payable (to be computed).

o. Wages earned since the December 24 pay date but not yet paid, $15,000.

p. Income tax expense for 2017 payable for 2017 payable in 2018, $8,000.

Required:

1. Set up T-accounts for the accounts on the trial balance and enter thier beginning balances.

2. Record transactions (a) through (k) and post them to the T-accounts.

3. Record and post the adjusting entries (l) through (p).

4. Prepare a statement of earnings (including earnings per share), a statement of changes in equity for 2017, and a statement of financial position at December 31, 2017.

5. Record and post the closing entries.

6. Prepare a post-closing trial balance.

7. Compute the following ratios for 2017 and explain what they mean:

a. Current ratio.

b. Total asset turnover ratio.

c. Net profit margin ration.

d. return on equity.

* please answer all the questions seperately.

Answer 1