Joe Gaskins and Matthew Perry began operations of their furniture repair shop (New Again Furniture, Inc.) on January 1, 2010. The annual reporting period ends December 31. The trial balance on January 1, 2011, was as follows:

Transactions during 2011 follow:
a. Borrowed $20,000 cash on July 1, 2011, signing a one-year, 10 percent note payable.
b. Purchased equipment for $18,000 cash on July 1, 2011.
c. Sold 5,000 additional shares of capital stock for cash at $1 market value per share.
d. Earned revenues for 2011, $65,000, including $9,000 on credit and the rest for cash.
e. Incurred remaining expenses for 2011, $35,000, including $7,000 on credit and the rest paid with cash.
f. Purchased additional small tools, $3,000 cash.
g. Collected accounts receivable, $8,000.
h. Paid accounts payable, $11,000.
i. Purchased $10,000 of supplies on account.
j. Received a $3,000 deposit on work to start January 15, 2012.
k. Declared and paid a cash dividend, $10,000.
Data for adjusting entries:
l. Supplies of $4,000 and small tools of $8,000 were counted on December 31, 2011 (debit Remaining Expenses).
m. Depreciation for 2011, $2,000.
n. Interest accrued on notes payable (to be computed).
o. Wages earned since the December 24 payroll but not yet paid, $3,000.
p. Income tax expense was $4,000, 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 the 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 Supplies Small tools Equipment Accumulated depreciation (equipment) Other assets (not detailed to simplify) Accounts payable Notes payable Wages payable Interest payable Income taxes payable $5,000 4.000 2.000 6,000 9,000 7,000 Unearned revenue Contributed capital (15,000 shares) Retained earnings Service revenue Depreciation expense Wages expense Income tax expense Interest expense Remaining expenses (not detailed to simplify) Totals 15,000 4.000 26,000 $26.000