9

4-2 (Algo) From Recording Transactions (Including Adjusting Journal Entries) to Preparing Financial Statements and Closing Journal Entries (Chapters 2, 3, and 4) [LO 2-3, LO 3-3, LO 4-1, LO 4-2, LO 4-3, LO 4-4, LO 4-5, LO 4-6]

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[The following information applies to the questions displayed below.] Brothers Harry and Herman Hausyerday began operations of their machine shop (H & H Tool, Incorporated) on January 1, 2020. The annual reporting period ends December 31. The trial balance on January 1, 2021, follows (the amounts are rounded to thousands of dollars to simplify):

Account Titles	Debit	Credit
Cash	$ 2
Accounts Receivable	6
Supplies	13
Land	0
Equipment	54
Accumulated Depreciation		$ 5
Software	21
Accumulated Amortization		6
Accounts Payable		4
Notes Payable (short-term)		0
Salaries and Wages Payable		0
Interest Payable		0
Income Tax Payable		0
Common Stock		72
Retained Earnings		9
Service Revenue	0
Salaries and Wages Expense	0
Depreciation Expense	0
Amortization Expense	0
Income Tax Expense	0
Interest Expense	0
Supplies Expense	0
Totals	$ 96	$ 96

Transactions and events during 2021 (summarized in thousands of dollars) follow:

1. Borrowed $11 cash on March 1 using a short-term note.
2. Purchased land on March 2 for future building site; paid cash, $8.
3. Issued additional shares of common stock on April 3 for $30.
4. Purchased software on July 4, $11 cash.
5. Purchased supplies on account on October 5 for future use, $19.
6. Paid accounts payable on November 6, $12.
7. Signed a $20 service contract on November 7 to start February 1, 2022.
8. Recorded revenues of $148 on December 8, including $34 on credit and $114 collected in cash.
9. Recognized salaries and wages expense on December 9, $79 paid in cash.
10. Collected accounts receivable on December 10, $18.

Data for adjusting journal entries as of December 31:

11. Unrecorded amortization for the year on software, $6.
12. Supplies counted on December 31, 2021, $12.
13. Depreciation for the year on the equipment, $5.
14. Interest of $1 to accrue on notes payable.
15. Salaries and wages earned but not yet paid or recorded, $11.
16. Income tax for the year was $7. It will be paid in 2022.

C4-2 (Algo) Part 9

Required:

1. 9-a. How much net income did H & H Tool, Incorporated, generate during 2021? What was its net profit margin?

2. 9-b. Is the company financed primarily by liabilities or stockholders equity?

3. 9-c. What is its current ratio?