Question

C4-2 From Recording Transactions (Including Adjusting Journal Entries) to Preparing Financial Statements and Closing Journal Entries (Chapters 2, 3, and 4) [LO 2-3, LO 3-3, LO 4-1, LO 4-2, LO 4-3, LO 4-4, LO 4-5, LO 4-6]

[The following information applies to the questions displayed below.]

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		50
Accumulated Depreciation				$	7
Software		23
Accumulated Amortization					5
Accounts Payable					6
Notes Payable (short-term)					0
Salaries and Wages Payable					0
Interest Payable					0
Income Tax Payable					0
Common Stock					67
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, $140, including $30 on credit and $110 collected in cash.
4.	Issued additional shares of stock for $2.
5.	Recognized salaries and wages expense for 2015, $75 paid in cash.
6.	Collected accounts receivable, $14.
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, $5.
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.

References

Section BreakC4-2 From Recording Transactions (Including Adjusting Journal Entries) to Preparing Financial Statements and Closing Journal Entries (Chapters 2, 3, and 4) [LO 2-3, LO 3-3, LO 4-1, LO 4-2, LO 4-3, LO 4-4, LO 4-5, LO 4-6]

1.

value:
1.11 points

Required information

C4-2 Part 2

Required:
2.	Record journal entries for transactions (1) through (10). (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.)

References

eBook & Resources

General JournalLearning Objective: 04-01 Explain why adjustments are needed.Learning Objective: 04-04 Prepare financial statements.

C4-2 Part 2Learning Objective: 04-02 Prepare adjustments needed at the end of the period.Learning Objective: 04-05 Explain the closing process.

Difficulty: 3 HardLearning Objective: 04-03 Prepare an adjusted trial balance.Learning Objective: 04-06 Explain how adjustments affect financial results.

Check my work

2.

value:
1.11 points

Required information

C4-2 Part 3, 5, and 8

3, 5 and 8.

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. (Enter your answers in thousands of dollars.)

References

eBook & Resources

WorksheetLearning Objective: 04-01 Explain why adjustments are needed.Learning Objective: 04-04 Prepare financial statements.

C4-2 Part 3, 5, and 8Learning Objective: 04-02 Prepare adjustments needed at the end of the period.Learning Objective: 04-05 Explain the closing process.

Difficulty: 3 HardLearning Objective: 04-03 Prepare an adjusted trial balance.Learning Objective: 04-06 Explain how adjustments affect financial results.

Check my work

3.

value:
1.11 points

Required information

C4-2 Part 3

3.	Post the journal entries from requirement 2 to T-accounts and prepare an unadjusted trial balance. (Enter your answers in thousands of dollars.)

References

eBook & Resources

WorksheetLearning Objective: 04-01 Explain why adjustments are needed.Learning Objective: 04-04 Prepare financial statements.

C4-2 Part 3Learning Objective: 04-02 Prepare adjustments needed at the end of the period.Learning Objective: 04-05 Explain the closing process.

Difficulty: 3 HardLearning Objective: 04-03 Prepare an adjusted trial balance.Learning Objective: 04-06 Explain how adjustments affect financial results.

Check my work

4.

value:
1.11 points

Required information

C4-2 Part 4

4.	Record the adjusting journal entries (11) through (16). (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.)

References

eBook & Resources

General JournalLearning Objective: 04-01 Explain why adjustments are needed.Learning Objective: 04-04 Prepare financial statements.

C4-2 Part 4Learning Objective: 04-02 Prepare adjustments needed at the end of the period.Learning Objective: 04-05 Explain the closing process.

Difficulty: 3 HardLearning Objective: 04-03 Prepare an adjusted trial balance.Learning Objective: 04-06 Explain how adjustments affect financial results.

Check my work

5.

value:
1.11 points

Required information

C4-2 Part 5

5.	Post the adjusting entries from requirement 4 and prepare an adjusted trial balance. (Enter your answers in thousands of dollars.)

References

eBook & Resources

WorksheetLearning Objective: 04-01 Explain why adjustments are needed.Learning Objective: 04-04 Prepare financial statements.

C4-2 Part 5Learning Objective: 04-02 Prepare adjustments needed at the end of the period.Learning Objective: 04-05 Explain the closing process.

Difficulty: 3 HardLearning Objective: 04-03 Prepare an adjusted trial balance.Learning Objective: 04-06 Explain how adjustments affect financial results.

Check my work

6.

value:
1.11 points

Required information

C4-2 Part 6

6.a	Prepare an income statement.

         

6.b	Prepare a statement of retained earnings.

         

6.c	Prepare balance sheet. (Amounts to be deducted should be indicated by a minus sign.)

         

References

eBook & Resources

Financial StatementsLearning Objective: 04-01 Explain why adjustments are needed.Learning Objective: 04-04 Prepare financial statements.

C4-2 Part 6Learning Objective: 04-02 Prepare adjustments needed at the end of the period.Learning Objective: 04-05 Explain the closing process.

Difficulty: 3 HardLearning Objective: 04-03 Prepare an adjusted trial balance.Learning Objective: 04-06 Explain how adjustments affect financial results.

Check my work

7.

value:
1.11 points

Required information

C4-2 Part 7

7.	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.)

References

eBook & Resources

General JournalLearning Objective: 04-01 Explain why adjustments are needed.Learning Objective: 04-04 Prepare financial statements.

C4-2 Part 7Learning Objective: 04-02 Prepare adjustments needed at the end of the period.Learning Objective: 04-05 Explain the closing process.

Difficulty: 3 HardLearning Objective: 04-03 Prepare an adjusted trial balance.Learning Objective: 04-06 Explain how adjustments affect financial results.

Check my work

8.

value:
1.11 points

Required information

C4-2 Part 8

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

References

eBook & Resources

WorksheetLearning Objective: 04-01 Explain why adjustments are needed.Learning Objective: 04-04 Prepare financial statements.

C4-2 Part 8Learning Objective: 04-02 Prepare adjustments needed at the end of the period.Learning Objective: 04-05 Explain the closing process.

Difficulty: 3 HardLearning Objective: 04-03 Prepare an adjusted trial balance.Learning Objective: 04-06 Explain how adjustments affect financial results.

Check my work

9.

value:
1.12 points

Required information

C4-2 Part 9

9-a.	How much net income did H & H Tool, Inc., generate during 2015? What was its net profit margin? (Enter "Net Income" in thousands of dollars. Round "Net Profit Profit" to 2 decimal places.)

9-b.	Is the company financed primarily by liabilities or stockholders’ equity?
	Stockholders' Equity Liabilities

9-c.	What is its current ratio? (Enter your answers in thousands of dollars.)

Answer 1

1. In the books of H & H Tool Inc. :

Transaction	Account Titles	Debit	Credit
		$	$
1.	Cash	13
	Note Payable		13
2.	Land	7
	Cash		7
3	Cash	110
	Accounts Receivable	30
	Service Revenue		140
4.	Cash	2
	Common Stock		2
5.	Salaries Expense	75
	Cash		75
6.	Cash	14
	Accounts Receivable		14
7.	Software	12
	Cash		12
8.	Accounts Payable	14
	Cash		14
9.	Supplies	17
	Accounts Payable		17
10.	No Journal Entry Required	0	0

3.

H & H Tool Inc.
Unadjusted Trial Balance
December 31, 2015
Account Titles	Debit	Credit
	$ ( '000)	$ ( ' 000)
Cash	35
Accounts Receivable	20
Supplies	28
Land	7
Equipment	50
Accumulated Depreciation		7
Software	35
Accumulated Amortization		5
Accounts Payable		9
Notes Payable		13
Salaries and Wages Payable		0
Interest Payable		0
Income Taxes Payable		0
Common Stock		69
Retained Earnings		7
Service Revenue		140
Salaries and Wages Expense	75
Depreciation Expense	0
Amortization Expense	0
Income Tax Expense	0
Interest Expense	0
Supplies Expense	0
Totals	250	250

4. Adjusting Entries:

Adjustment	Account Titles	Debit	Credit
		$	$
11.	Amortization Expense	5
	Accumulated Amortization		5
12.	Supplies Expense	17
	Supplies		17
13.	Depreciation Expense	7
	Accumulated Depreciation		7
14.	Interest Expense	2
	Interest Payable		2
15.	Salaries and Wages Expense	13
	Salaries and Wages Payable		13
16.	Income Tax Expense	9
	Income Taxes Payable		9

5.

H & H Tools Inc.
Adjusted Trial Balance
December 31, 2015
Account Titles	Debit	Credit
	$	$
Cash	35
Accounts Receivable	20
Supplies	11
Land	7
Equipment	50
Accumulated Depreciation		14
Software	35
Accumulated Amortization		10
Accounts Payable		9
Note Payable		13
Salaries and Wages Payable		13
Interest Payable		2
Income Tax Payable		9
Common Stock		69
Retained Earnings		7
Service Revenue		140
Salaries and Wages Expense	88
Depreciation Expense	7
Amortization Expense	5
Income Tax Expense	9
Interest Expense	2
Supplies Expense	17
Totals	286	286

6-a.

H & H Tools Inc.
Income Statement
For the year ended December 31, 2015
	$ ( ' 000 )	$ ( ' 000 )
Service Revenue		140
Less: Operating Expenses
Salaries Expense	88
Supplies Expense	17
Depreciation Expense	7
Amortization Expense	5
Total Operating Expenses		117
Operating Income		23
Interest Expense		(2)
Earnings before Taxes		21
Income Tax Expense		(9)
Net Income		12

6-b.

H & H Tools Inc.
Statement of Retained Earnings
For the year ended December 31, 2015
Retained Earnings, January 1	7
Add:Net Income for the year	12
Less: Dividends	0
Retained Earnings, DEcember 31	19

6-c.

H & H Tools Inc.
Balance Sheet
December 31, 2015
Assets	$	$	$
Cash		35
Accounts Receivable		20
Supplies		11
Total Current Assets			66
Property Plant and Equipment
Land		7
Equipment	50
Accumulated Depreciation	- 14	36
Software	35
Accumulated Amortization	- 10	25
Property, Plant and Equipment, Net			68
Total Assets			134
Liabilities
Accounts Payable		9
Note Payable ( Short- term )		13
Salaries and Wages Payable		13
Interest Payable		2
Income Taxes Payable		9
Total Current Liabilities			46
Long - Term Liabilities			0
Total Liabilities			46
Stockholders' Equity
Common Stock		69
Retained Earnings		19
Total Stockholders Equity			88
Total Liabilities and Stockholders Equity			134