Brothers Hadi and Hamid Gaber began operations of their tool and die shop (H \& H Tool Inc.) on January 1, 2010. The company's fiscal year ends on December 31. The trial balance on January 1, 2011, was as follows (the amounts are rounded to thousands of dollars):

Transactions and events during 2011 (summarized in thousands of dollars) follow:

a. Borrowed \(\$ 10\) cash on a 12 percent note payable, dated March \(1,2011\).

b. Purchased land for future building site, paid cash, \(\$ 9\).

c. Earned revenues for 2011 of \(\$ 160\), including \(\$ 50\) on credit.

d. Sold 3,000 additional shares for \(\$ 1\) cash per share (show dollars in thousands).

e. Recognized other expenses for \(2011 ; \$ 85\), including \(\$ 20\) on credit.

f. Collected trade receivables, \(\$ 24\).
g. Purchased additional assets, \(\$ 10\) cash (debit other assets account).
h. Paid trade payables, \(\$ 13\).
i. Purchased service supplies on account, \(\$ 18\) (debit to Account No. 03).
j. \(\quad\) Signed a \(\$ 25\) service contract to start February 1, 2012.
k. Declared and paid cash dividend, \(\$ 15\).
Data for adjusting entries:
l. Service supplies inventory on hand at December \(31,2011, \$ 12\) (debit other expenses account).
\(m\). The equipment's useful life is 10 years; no residual value.
n. Accrued interest on notes payable (to be computed).
o. Wages earned since the December 24 pay date but not yet paid, \(\$ 15\).
p. Income tax expense payable in \(2012, \$ 8\).
Required:
1. Set up \(\mathrm{T}\)-accounts for the accounts on the trial balance and enter their beginning balances.
2. Record transactions \((a)\) throùgh \((k)\) and post them to the \(T\)-accounts.
3. Record and post the adjusting entries (l) through (p).

4. Prepare an income statement (including earnings per share), a statement of changes in equity for 2011 , and a statement of financial position at December 31, 2011.
5. Record and post the closing entries.
6. Prepare a post-closing trial balance.
7. Compute the following ratios for 2011 and explain what they mean:

a. debt-to-equity

b. total asset turnover

c. net profit margin

d. return on equity

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Account No. Account Titles Debit Credit 01 Cash 3 02 Trade receivables 5 03 Service supplies inventory 12 04 Land 05 Equipment 06 07 Accumulated depreciation (equipment) Other assets (not detailec to simplify) 11 Trade payables 60 6 4 5 12 Notes payable 13 Wages payable 14 Interest payable 15 Income taxes payable 21 Share capital (65,000 shares) 65 31 35 40 41 42 43 Retained earnings Service revenue Depreciation expense Income tax expense Interest expense Other expenses Totals 8 84 84