Brothers Steve and Herman Hargenrater began operations of their tool and die shop (H & H Tool, Inc.) on January 1, 2010. The annual reporting period ends December 31. The trial balance on January 1, 2011, follows:

Transactions during 2011 follow:
a. Borrowed $12,000 cash on a five-year, 10 percent note payable, dated March 1, 2011.
b. Purchased land for a future building site; paid cash, $12,000.
c. Earned revenues for 2011, $208,000, including $52,000 on credit and the rest in cash.
d. Sold 4,000 additional shares of capital stock for cash at $1 market value per share on January 1, 2011.
e. Incurred $111,000 in Remaining Expenses for 2011, including $20,000 on credit and the rest paid in cash.
f. Collected accounts receivable, $31,000.
g. Purchased other assets, $13,000 cash.
h. Paid accounts payable, $17,000.
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, 2011, $18,000.
m. Depreciation 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 are not yet paid, $16,000.
p. Income tax expense was $10,000, payable in 2012.

Required:
1. Set up T-accounts for the accounts on the trial balance and enter beginning balances.
2. Prepare journal entries for transactions (a) through (k) and post them to the T-accounts.
3. Journalize and post the adjusting entries (l) through (p).
4. Prepare 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. Prepare a post-closing trial balance.
7. Compute the following ratios for 2011 and explain what the results suggest about the company:
a. Financial leverage
b. Total asset turnover
c. Net profitmargin

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Account Titles Debit Credit Cash Accounts receivable 4,000 7,000 6,000 78,000 Accumulated Other assets (not detailed to simplify) Accounts payable Wa Interest payable Income taxes pavable Long-term notes pavable Contributed capital (85,000 shares) Retained earnings Service revenue ation (on equipment) $8,000 5.000 85,000 17,000 ation expense Income tax expense Interest expense Supplies expense Wages expense Remaining expenses (not detailed to simplify Totals 10,000I10,000