COMP4-1 (Static) Recording Transactions (Including Adjusting and Closing Entries), Preparing Financial Statements, and Performing Ratio Analysis LO4-1, 4-2, 4-3, 4-4 (GL)

Brothers Mike and Tim Hargenrater began operations of their tool and die shop (H & H Tool, Inc.) on January 1, 2019. The annual reporting period ends December 31. The trial balance on January 1, 2020, follows:

H & H Tool, Inc. Trial Balance on January 1, 2020
	Debit				Credit
Cash		6,000
Accounts receivable		5,000
Supplies		13,000
Land
Equipment		78,000
Accumulated depreciation (on equipment)						8,000
Other noncurrent assets (not detailed to simplify)		7,000
Accounts payable
Wages payable
Interest payable
Dividends payable
Income taxes payable
Long-term notes payable
Common stock (8,000 shares, $0.50 par value)						4,000
Additional paid-in capital						80,000
Retained earnings						17,000
Service revenue
Depreciation expense
Supplies expense
Wages expense
Interest expense
Income tax expense
Miscellaneous expenses (not detailed to simplify)
Totals		109,000				109,000

Transactions during 2020 follow:

Borrowed $15,000 cash on a five-year, 8 percent note payable, dated March 1, 2020.

Purchased land for a future building site; paid cash, $13,000.

Earned $215,000 in revenues for 2020, including $52,000 on credit and the rest in cash.

Sold 4,000 additional shares of capital stock for cash at $1 market value per share on January 1, 2020.

Incurred $89,000 in wages expense and $25,000 in miscellaneous expenses for 2020, with $20,000 on credit and the rest paid in cash.

Collected accounts receivable, $34,000.

Purchased other assets, $15,000 cash.

Purchased supplies on account for future use, $27,000.

Paid accounts payable, $26,000.

Signed a three-year $33,000 service contract to start February 1, 2021.

Declared cash dividends on December 1, $25,000, which were paid by December 31. [Hint: Prepare two entries.]

Data for adjusting entries:

Supplies counted on December 31, 2020, $18,000.

Depreciation for the year on the equipment, $10,000.

Interest accrued on notes payable (to be computed).

Wages earned by employees since the December 24 payroll but not yet paid, $16,000.

Income tax expense, $11,000, payable in 2021.

General Journal tab - (Step 1) Prepare the journal entries to record the first 12 transactions (transactions (a) through (k)). Review the accounts as shown in the General Ledger and Trial Balance tabs.

(Step 2) Prepare the necessary adjusting entries (13) through (16) (transactions (i) through (p)) to correctly report net income for the period.

(Step 3) After preparing the financial statements, record the closing entry (17). Notice the effect on the trial balance, income statement, and balance sheet tabs once the closing entry is posted.

General Ledger tab - Each journal entry is posted automatically to the General Ledger. Use the drop-down button to view the unadjusted, adjusted, or post-closing balances in the General Ledger.

Trial Balance tab - You may view either the unadjusted, adjusted, or post-closing trial balance by choosing from the drop-down. Your choice will determine the reported values on the financial statement tabs.

Income Statement tab - Use the drop-downs to select the accounts that should be properly included on the Income Statement. Compute earnings per share. The unadjusted, adjusted, or post-closing balances will appear for each account, based on your selection.

Statement of Stockholders' Equity tab - Use the drop-downs to select the accounts that should be properly included on the Statement of Stockholders' Equity and enter the appropriate amounts.

Balance Sheet tab - Use the drop-downs to select the accounts that should be properly included on the Balance Sheet. The unadjusted, adjusted, or post-closing balances will appear for each account, based on your selection.

Analysis tab - Calculate the current ratio, total asset turnover ratio, and net profit margin ratio for 2020.