Brothers Mike and Tim Hargen began operations of their tool and die shop (H & H
ID: 2574214 • Letter: B
Question
Brothers Mike and Tim Hargen began operations of their tool and die shop (H & H Tool, Inc.) on January 1, 2016. The annual reporting period ends December 31. The trial balance on January 1, 2017, follows Debit 5,000 4,000 13,000 Account Titles Accounts receivable Supplies 80,000 Equipment Accumulated depreciation (on equipment) Other assets (not detailed to simplify) Accounts payable Wages payable Interest payable Income taxes payable Long-term notes payable Common stock (8,000 shares, $.50 par value) Additional paid-in capital Retained earnings Service revenue Depreciation expense Supplies expense Wages expense Interest expense Income tax expense Remaining expenses (not detailed to simplify) 10,000 9,000 4,000 82,000 15,000 4 Totals 111,000 111,000Explanation / Answer
Journal Entries for the transactions during 2017
a) Cash - Debit $24,000
To Long term notes Payable - Credit $24,000
(recording cash barrowed on 5 years Note at 10% on March 2017)
b) Land - Debit $13,000
To Cash - Credit $13,000
(being land purchased and paid in cash for future building on March 15, 2017)
c) Cash - Debit $180,000
Accounts receivable - Debit $51,000
To Service revenue - Credit $231,000
(being revenue recorded for august 30,2017)
d) Cash - Debit $4,000
To Common stock - Credit $4,000
(being issue of common stock at $1 on January 1, 2017)
e) Remaining expenses - Debit $118,000
To Cash - Credit $96,000
To Accounts payable - Credit $22,000
(being supplies expenses recorded for invoices dated October 15, 2017)
f) Cash - Debit $36,000
To Accounts receivable - $36,000
(being accounts receivable collected on November 10, 2017)
g) Other assets - Debit $13,000
To Cash - Credit $13,000
(being other assets purchase for cash on November 15, 2017)
h) Supplies expenses - Debit $25,000
To Cash - Credit $25,000
(being supply expenses recorded on December 1,2017)
i) Accounts payable - Debit $24,000
To Cash - Credit $24,000
(being payment made to vendors on December 15,2017)
j) Since agreement for service contract is signed and no transaction happened hence, no journal required
k) Dividends -Debit $23,000
To Cash - Credit $23,000
(being dividends declared and paid to share holders on December 20, 2017)
l) Stock - supplies (closing) - Debit $16,000
To Purchase - Supplies - Credit $16,000
(being record of closing Stock of supplied on December 31, 2017)
m) Depreciation expense - Debit $12,000
To Accumulated depreciation (on equipment )- Credit $12,000
(being depreciation expenses recorded on equipment)
n) Interest expenses - Debit $2,400
($24,000 * 10%)
To Interest payable - credit $2,400
(being interest on notes payable accrued)
o) Wages expenses - Debit $15,000
To Wages payable - Credit $15,000
(being wages earned after December 24 accrued)
p) Income tax expense - Debit $11,000
To Income taxes payable - Credit $11,000
(being income tax accrued for the year)
Please Note: 1) In case one question with multiple subparts, only first 4 subparts needs be answered as a mandatory requirement and
2) In case of multiple questions only first question (full) with minimum 4 sub parts (in case of more sub parts) needs to be answered as a mandatory requirement.
I have prepared journal entries for transaction (1) through (16) which is more than 4 sub parts.
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