Setting-up t-accounts for accounts on trial balance


Brothers Mike and Tim Hargen began operations of their tool and die shop (H & H Tool, Inc) on January 1, 2011. Annual reporting period ends December 31.Trial balance on January 1, 2012 is as follows:

599_Balance sheet.jpg

Transactions during 2012 are as follow:

a) Borrowed $12,000 cash on a five-year, 10 percent note payable, dated March 1, 2012

b) Purchased land for a future building site; paid cash, $12,000

c) Earned $208,000 in revenues for 2012, including $52,000 on credit and the rest in cash.

d) Sold 4,000 further shares of capital stock for cash at $1 market value per share on January 1, 2012.

e) Incurred $11,000 in Remaining Expenses for 2012, including $20,000 on credit and the rest paid in cash.

f) Collected accounts receivable, $34,000.

g) Purchased other assets, $13,000 cash.

h) Paid accounts payable, $19,000.

i) Purchased supplies on account for future use, $23,000.

j) Signed a three-year $33,000 service contract to start February 1, 2012.

k) Declared and paid cash dividends, $22,000.

Data for adjusting entries:

l) Supplies counted on December 31, 2012, $18,000.

m) Depreciated for the year on the equipment, $8,000.

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 $10,000, payable in 2013.

Required:

1) Set-up T-accounts for the accounts on the trial balance and enter beginning balance.

2) Make journal entries for transactions (a) through (k) and post them to the T-accounts.

3) Journalize and post the adjusting entry (I) through (p).

4) Make an income statement (including earnings per share), statement of stockholders’ equity, balance sheet and statement of cash flows.

5) Journalize and post the closing entry.

6) calculate the following ratios for 2012 and describe what the results suggest about the company:

a) Current Ratio

b) Total asset turnover

c) Net profit margin

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Financial Accounting: Setting-up t-accounts for accounts on trial balance
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