BrotherBrothers Herm and Steve Hargenrater began operations of their tool and die shop (H & H Tool) on January 1, 1987, in Meadville, PA. The annual reporting period ends December 31. Assume that the trial balance on January 1, 2023, was as follows:
H & H Tool
Trial Balance on January 1, 2023
(dollars in millions, except par value)
Debit Credit
Cash 6
Accounts receivable 5
Supplies 13
Land
Equipment 78
Accumulated depreciation (on equipment) 8
Other noncurrent assets (not detailed to simplify) 7
Accounts payable
Wages payable
Interest payable
Dividends payable
Income taxes payable
Long-term notes payable
Common stock (8 million shares, $0.50 par value) 4
Additional paid-in capital 80
Retained earnings 17
Service revenue
Depreciation expense
Supplies expense
Wages expense
Interest expense
Income tax expense
Miscellaneous expenses (not detailed to simplify)
Totals 109 109
Transactions during 2023 follow. All dollars are in millions, except per share amounts:
a. Borrowed $15 cash on a five-year, 8 percent note payable, dated March 1, 2023.
b. Sold 4 million additional shares of common stock for cash at $1 market value per share on January 1, 2023.
c. Purchased land for a future building site; paid cash, $13.
d. Earned $215 in revenues for 2023, including $52 on credit and the rest in cash.
e. Incurred $89 in wages expense and $25 in miscellaneous expenses for 2023, with $20 on credit and the rest paid in cash.
f. Collected accounts receivable, $34.
g. Purchased other noncurrent assets, $15 cash.
h. Purchased supplies on account for future use, $27.
i. Paid accounts payable, $26.
j. Declared cash dividends on December 1, $25.
k. Signed a three-year $33 service contract to start February 1, 2024.
l. Paid the dividends in (j) on December 31.
Data for adjusting entries (amounts in millions):
m. Supplies counted on December 31, 2023, $18.
n. Depreciation for the year on the equipment, $10.
o. Interest accrued on notes payable (to be computed).
p. Wages earned by employees since the December 24 payroll but not yet paid, $16.
q. Income tax expense, $11, payable in 2024.
General Journal tab - (Step 1) Prepare the journal entries to record the first 12 transactions (transactions (a) through (l)). Review the accounts as shown in the General Ledger and Trial Balance tabs.
(Step 2) Prepare the necessary adjusting entries (13) through (17) (transactions (m) through (q)) to correctly report net income for the period.
(Step 3) After preparing the financial statements, record the closing entry (18). 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.
Statement of Cash Flows tab - For each transaction, identify the appropriate cash flow classification (if any) and the transaction's impact on cash.
Analysis tab - Calculate the current ratio, total asset turnover ratio, and net profit margin ratio for 2023.
Prepare journal entries for transactions.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rather than in dollars (for example, 5 million should be entered as 5 rather than 5,000,000).
100: Cash
120: Accounts receivable
000: No journal entry required
100 Cash
120: Accounts receivable
122: Interest receivable
123: Income tax receivable
124: Rent receivable
125: Notes receivable
128: Supplies
130: Inventory
134: Prepaid rent
135: Prepaid expenses
136: Investments
137: Other noncurrent assets
140: Equipment
170: Accumulated depreciation—equipment
180: Land
200: Accounts payable
205: Accrued expenses payable
206: Unearned revenue
207: Wages payable
208: Utilities payable
209: Income taxes payable
210: Dividends payable
215: Interest payable
221: Notes payable, long-term
310: Common stock
320: Additional paid-in capital
330: Retained earnings
340: Treasury stock
400: Sales revenue
401: Service revenue
405: Rent revenue
524: Miscellaneous expenses
530: Interest revenue
550: Advertising expense
551: Property tax expense
552: Interest expense
553: Maintenance expense
554: Repairs expense
555: Supplies expense
562: Utilities expense
563: Depreciation expense
564: Income tax expense
566: Insurance expense
567: Wages expense
1.Record the borrowed $15 cash on a five-year note payable, dated January 1, 2023.
2.Record the sold 4 million additional shares of common stock for cash at $1 market value per share on March 1, 2023.
3.Record the purchased land for a future building site; paid cash, $13.
4.Record the earned $215 in revenues for 2023, including $52 on credit and the rest in cash.
5.Record the wages expense of $89 and miscellaneous expenses of $25 incurred for 2023, with $20 on credit and the rest paid in cash.
6.Record the collection of accounts receivable, $34.
7.Record the purchase of other noncurrent assets, $15 cash.
8.Record the purchase of supplies on account for future use, $27.
9.Record the payment of accounts payable, $26.
10.Record the $25 cash dividends declared on December 1.
11.Record the $33 three-year service contract signed to start February 1, 2024.
12.Record the payment of cash dividends on December 31, $25.
13.Supplies counted on December 31, 2023, $18. Prepare the adjusting entry needed at December 31.
14.Depreciation for the year on the equipment, $10. Prepare the adjusting entry needed at December 31.
15.Interest accrued on notes payable (to be computed). Prepare the adjusting entry needed at December 31.
16.Wages earned by employees since the December 24 payroll but not yet paid, $16. Prepare the adjusting entry needed at December 31.
17.Income tax expense, $11, payable in 2024. Prepare the adjusting entry needed at December 31.
18.Record the closing entry. Prepare the adjusting entry needed at December 31.