Serena and Bill Davis began operations of their furniture repair shop, Rumours Furniture Inc., on January 1, 2010. The company's fiscal year ends December 31. The trial balance on January 1, 2011, was as follows (the amounts are rounded to thousands of dollars):

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

a. Borrowed \(\$ 25\) cash on an 8 percent note payable, dated July 1, 2011.

b. Purchased equipment for \(\$ 18\) cash on July \(1,2011\).

c. Sold 5,000 additional shares for \(\$ 1\) cash per share (show dollars in thousands).

d. Earned revenues for \(2011, \$ 74\), including \(\$ 15\) on credit.

e. Recognized other expenses for \(2011, \$ 35\), including \(\$ 9\) on credit.

f. Purchased additional small tools inventory, \(\$ 3\) cash.
g. Collected trade receivables, \(\$ 8\).
h. Paid trade payables, \(\$ 11\).
i. Purchased supplies on account, \(\$ 10\) (debit to Account No. 03).
j. Received a \(\$ 3\) deposit on work to start January 15, 2012.
k. Declared and paid cash dividend, \(\$ 12\).

Data for adjusting entries:
l. Service supplies inventory of \(\$ 4\) and small tools inventory of \(\$ 9\) were on hand at December 31 , 2011 (debit other expenses account).
\(m\). The equipment's useful life is four years and its residual value is \(\$ 2\).
n. Accrued interest on notes payable (to be computed).
o. Wages earned since the December 24 pay date but not yet paid, \(\$ 4\).
p. Income tax expense payable in \(2012, \$ 4\).
\section*{Required:}
1. Set up \(\mathrm{T}\)-accounts for the accounts on the trial balance and enter their beginning balances.
2. Record transactions \((a)\) through \((k)\) 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) for 2011, 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 5426 9 7 01 Cash 02 03 Supplies inventory 04 05 06 07 11 12 Trade receivables Small tools inventory Equipment Accumulated depreciation (equipment) Other assets (not detailed to simplify) Trade payables Notes payable 13 Wages payable 14 15 16 21 31 35 40 41 42 43 Interest payable Income taxes payable Deferred revenue Share capital (15,000 shares) Retained earnings Service revenue Depreciation expense. Income tax expense Interest expense Other expenses Totals 54 15 26 26