Question: Brothers Mike and Tim Hargen began operations of their tool

Brothers Mike and Tim Hargen began operations of their tool and die shop (H & H Tool, Inc.) on January 1, 2014. The annual reporting period ends December 31. The trial balance on January 1, 2015, follows:

Transactions during 2015 follow:
a. Borrowed $15,000 cash on a five-year, 8 percent note payable, dated March 1, 2015.
b. Purchased land for a future building site; paid cash, $13,000.
c. Earned $215,000 in revenues for 2015, including $52,000 on credit and the rest in cash.
d. Sold 4,000 additional shares of capital stock for cash at $1 market value per share on January 1, 2015.
e. Incurred $114,000 in Remaining Expenses for 2015, including $20,000 on credit and the rest paid in cash.
f. Collected accounts receivable, $34,000.
g. Purchased other assets, $15,000 cash.
h. Purchased supplies on account for future use, $27,000.
i. Paid accounts payable, $26,000.
j. Signed a three-year $33,000 service contract to start February 1, 2016.
k. Declared and paid cash dividends, $25,000.
Data for adjusting entries:
l. Supplies counted on December 31, 2015, $18,000.
m. Depreciation for the year on the equipment, $10,000.
n. Interest accrued on notes payable (to be computed).
o. Wages earned by employees since the December 24 payroll but not yet paid, $16,000.
p. Income tax expense, $11,000, payable in 2016.

1. Set up T-accounts for the accounts on the trial balance and enter beginning balances.
2. Prepare journal entries for transactions (a) through (k) and post them to the T-accounts.
3. Journalize and post the adjusting entries (l) through (p).
4. Prepare an income statement (including earnings per share), statement of stockholders’ equity, and balance sheet.
5. Identify the type of transaction for (a) through (k) for the statement of cash flows (O for operating, I for investing, F for financing), and the direction and amount of the effect.
6. Journalize and post the closing entry.
7. Compute the following ratios for 2015 and explain what the results suggest about the company:
a. Current ratio
b. Total asset turnover
c. Net profitmargin

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  • CreatedJuly 01, 2014
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