Brothers Harry and Herman Hausyerday began operations of their machine shop (H &
ID: 2540550 • Letter: B
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):
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.
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 $ 92Explanation / Answer
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
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