Question

Brothers Harry and Herman Hausyerday began operations of their machine shop (H & H Tool, Inc.) on January 1, 2013. The annual reporting period ends December 31. The trial balance on January 1, 2015, follows (the amounts are rounded to thousands of dollars to simplify):

Account Titles	Debit			Credit
Cash	$	4
Accounts Receivable		4
Supplies		11
Land		0
Equipment		53
Accumulated Depreciation				$	7
Software		20
Accumulated Amortization					7
Accounts Payable					6
Notes Payable (short-term)					0
Salaries and Wages Payable					0
Interest Payable					0
Income Tax Payable					0
Common Stock					65
Retained Earnings					7
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	$	92		$	92

Transactions during 2015 (summarized in thousands of dollars) follow:
1.	Borrowed $13 cash on a six-month note payable dated March 1, 2015.
2.	Purchased land for future building site; paid cash, $7.
3.	Earned revenues for 2015, $146, including $33 on credit and $113 collected in cash.
4.	Issued additional shares of stock for $2.
5.	Recognized salaries and wages expense for 2015, $78 paid in cash.
6.	Collected accounts receivable, $17.
7.	Purchased software, $12 cash.
8.	Paid accounts payable, $14.
9.	Purchased supplies on account for future use, $17.
10.	Signed a $30 service contract to start February 1, 2016.
Data for adjusting journal entries:
11.	Unrecorded amortization for the year on software, $7.
12.	Supplies counted on December 31, 2015, $11.
13.	Depreciation for the year on the equipment, $7.
14.	Accrued interest of $2 on notes payable.
15.	Salaries and wages earned but not yet paid or recorded, $13.
16.	Income tax for the year was $9. It will be paid in 2016.

1.) Set up T-accounts for the accounts on the trial balance. Enter beginning balances and post the transactions 1-10, adjusting entries 11-16, and closing entry.

2.) Setup unadjusted trial balance.

3.) Record adjusting journal entries.

4.) Setup adjusted trial balance.

5.) Prepare an income statement.

Answer 1

1. Set up T-accounts for the accounts on the trial balance
		Cash A/c
		Debit			Credit
Date	Particulars	Amount	Date	Particulars	Amount
1/1/2015	To bal b/d	4	-	By Land	7
1/3/2015	To loan	13	-	By Salaries & Wages	78
	To sale	113		By Software	12
	To common Stock	2		By Account Payable	14
	To Account Receivable	17
				By Balance C/d	38
	Total	149		Total	149
		Account Receivable
		Debit			Credit
Date	Particulars	Amount	Date	Particulars	Amount
	To bal b/d	4		By cash	17
	To sale	33
				By Balance C/d	20
	Total	37		Total	37
		Common Stock
		Debit			Credit
Date	Particulars	Amount	Date	Particulars	Amount
				By bal b/d	65
				By cash	2
	By Balance C/d	67
	Total	67		Total	67
		Notes Payable (short-term) A/c
		Debit			Credit
Date	Particulars	Amount	Date	Particulars	Amount
				By cash	13
	By Balance C/d	13
	Total	13		Total	13
		Land A/c
		Debit			Credit
Date	Particulars	Amount	Date	Particulars	Amount
	To cash	7
				By Balance C/d	7
	Total	7		Total	7
		Software A/c
		Debit			Credit
Date	Particulars	Amount	Date	Particulars	Amount
	To balance b/d	20
	To cash	12
				By Balance C/d	32
	Total	32		Total	32
		Supplies A/c
		Debit			Credit
Date	Particulars	Amount	Date	Particulars	Amount
	To balance b/d	11		By Supplies expense (B/f)	17
	To cash	17
				By Balance C/d	11
	Total	28		Total	28
		Salaries & Wages
		Debit			Credit
Date	Particulars	Amount	Date	Particulars	Amount
	To cash	78
	To Salaries & wages Payable	13
	Total	91		Total	0
		Amortization expenses
		Debit			Credit
Date	Particulars	Amount	Date	Particulars	Amount
	To Accumulated Amortization	7
	Total	7		Total	0
		Depreciation
		Debit			Credit
Date	Particulars	Amount	Date	Particulars	Amount
	To Accumulated Depreciation	7
	Total	7		Total	0
		Interest Expense
		Debit			Credit
Date	Particulars	Amount	Date	Particulars	Amount
	To Accured Interest Payable	2
	Total	2		Total	0
		Income Tax Expense
		Debit			Credit
Date	Particulars	Amount	Date	Particulars	Amount
	To Accured Interest Payable	9
	Total	9		Total	0
		Service Revenue A/c
		Debit			Credit
Date	Particulars	Amount	Date	Particulars	Amount
				By Cash	13
				By Account Recievable	133
	Total	0		Total	146
		Supplies Payable
		Debit			Credit
Date	Particulars	Amount	Date	Particulars	Amount
				By Office Supplies	17
	By Balance C/d	17
	Total	17		Total	17
		Accumulated Amortization A/c
		Debit			Credit
Date	Particulars	Amount	Date	Particulars	Amount
				By Balance b/d	7
	By Balance C/d	14		By Amortization expense	7
	Total	14		Total	14
		Accumulated Depreciation A/c
		Debit			Credit
Date	Particulars	Amount	Date	Particulars	Amount
				By Balance b/d	7
	By Balance C/d	14		By Amortization expense	7
	Total	14		Total	14
		Account Payable
		Debit			Credit
Date	Particulars	Amount	Date	Particulars	Amount
	By cash	14		By Balance b/d	6
				By Balance C/d	8
	Total	14		Total	14
		Salaries & Wages Payable
		Debit			Credit
Date	Particulars	Amount	Date	Particulars	Amount
	By Balance C/d	13		By Salaries & Wages expense	13
	Total	13		Total	13
2.Un adjusted Trial Balance
Account Titles	Debit	Credit
Cash	38
Accounts Receivable	20
Supplies	28
Land	7
Equipment	53
Accumulated Depreciation		7
Software	32
Accumulated Amortization		7
Accounts Payable	8
Supplies Payable		17
Notes Payable (short-term)		13
Common Stock		67
Retained Earnings		7
Service Revenue		146
Salaries and Wages Expense	78
Totals	264	264
	Journal Entries
Transactions during 2015 (summarized in thousands of dollars) follow:		Journal Entry
				Debit	Credit
1	Borrowed $13 cash on a six-month note payable dated March 1, 2015.
		Cash	Dr	13
		To   Notes Payable (short-term)			13
2	Purchased land for future building site; paid cash, $7.
		Land	Dr	7
		To cash			7
3	Earned revenues for 2015, $146, including $33 on credit and $113 collected in cash.	Cash	Dr	113
		Account Receivable	Dr	33
		To Sale			146
4	Issued additional shares of stock for $2.
		Cash	Dr	2
		To Common Stock			2
5	Recognized salaries and wages expense for 2015, $78 paid in cash.
		Salaries & wages	Dr	78
		To cash			78
6	Collected accounts receivable, $17.
		cash	Dr	17
		To Account Receivable			17
7	Purchased software, $12 cash.
		Software	Dr	12
		To cash			12
8	Paid accounts payable, $14.
		Account Payable	Dr	14
		To cash			14
9	Purchased supplies on account for future use, $17.	Supplies	Dr	17
		To Supplies Payable			17
10	Signed a $30 service contract to start February 1, 2016.	No Entry
Adjusting Entries
11	Unrecorded amortization for the year on software, $7.
		Amortization Expenses	Dr	7
		To Accumulated Amortization			7
12	Supplies counted on December 31, 2015, $11.
		Supplies expense	Dr	17
		To Supplies			17
13	Depreciation for the year on the equipment, $7.
		Depreciation	Dr	7
		To Accumulated Depreciation			7
14	Accrued interest of $2 on notes payable.
		Interest Expense	Dr	2
		To Accrued Interest Payable			2
15	Salaries and wages earned but not yet paid or recorded, $13.
		Salaries & Wages Expenses	Dr	13
		To Salaries & Wages Payable			13
16	Income tax for the year was $9. It will be paid in 2016.
		Income tax expense	Dr	9
		To Income Tax Payable			9
4. Adjusted Trial Balance
Account Titles	Debit	Credit
Cash	38
Accounts Receivable	20
Supplies	11
Land	7
Equipment	53
Accumulated Depreciation		14
Software	32
Accumulated Amortization		14
Accounts Payable	8
Supplies Payable		17
Notes Payable (short-term)		13
Salaries and Wages Payable		13
Interest Payable		2
Income Tax Payable		9
Common Stock		67
Retained Earnings		7
Service Revenue		146
Salaries and Wages Expense	91
Depreciation Expense	7
Amortization Expense	7
Income Tax Expense	9
Interest Expense	2
Supplies Expense	17
Totals	302	302