Adjusting and Closing Entries), Preparing a Complete COMP4-1 Set of Financial Statements, and Performing Ratio Analysis Brothers Anthony and Christopher Gaber began operations of their tool and die shop (A \& C Tools Inc.) on January 1, 2019. The company's fiscal year ends on December 31. The trial balance on January 1, 2020, was as follows:

Transactions and events during 2020 are as follows: a. Borowed \( \$ 10,000 \) cash on a 6 percent note payable, dated March 1, 2020. b. Purchased land for future building site; paid cash, \( \$ 9,000 \). c. Earned revenues for 2020 of \( \$ 160,000 \), including \( \$ 50,000 \) on credit. d. Sold 3,000 additional shares for \( \$ 1 \) cash per share. c. Recognized other expenses for \( 2020, \$ 85,000 \), including \( \$ 20,000 \) on credit. f. Collected accounts receivable, \( \$ 24,000 \). g. Purchased additional assets, \( \$ 10,000 \) cash (debit other assets account). h. Paid accounts payable, \( \$ 13,000 \). i. Purchased service supplies on account, \( \$ 18,000 \) (debit to Account No. 03). j. Signed a \( \$ 25,000 \) service contract to start February 1, 2021. k. Declared and paid cash dividend, \( \$ 15,000 \). Data for adjusting entries are as follows: 2. Service supplies inventory on hand at December 31, 2020, \$12,000 (debit other expenses acc \( m \). Depreciation on the equipment estimated at \( \$ 6,000 \) per year. n. Accrued interest on notes payable (to be computed). o. Wages earned since the December 24 pay date but not yet paid, \( \$ 15,000 \). \( p \). Income tax expense for 2020 payable in \( 2021, \$ 8,000 \). Required: 1. Set up 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 a statement of earnings (including earnings per share), a statement of changes in ec for 2020, and a statement of financial position at December 31, 2020. 5. Record and post the closing entries. 6. Prepare a post-closing trial balance. 7. Compute the following ratios for 2020 and explain what they mean: a. Current ratio b. Total asset turnover ratio c. Net profit margin ratio d. Return on equity

Recording Transactions (Including Adjusting and Closing Entries), Preparing a Complete Set of Financial Statements, and Performing Ratio Analysis Brothers Anthony and Christopher Gaber began operations of their tool and die shop (A \& C Tools Inc.) on January 1, 2019. The company's fiscal year ends on December 31. The trial balance on January 1, 2020, was as follows:

Transactions and events during 2020 are as follows: a. Borrowed \( \$ 10,000 \) cash on a 6 percent note payable, dated March \( 1,2020 \). b. Purchased land for future building site; paid cash, \( \$ 9,000 \). c. Earned revenues for 2020 of \( \$ 160,000 \), including \( \$ 50,000 \) on credit. d. Sold 3,000 additional shares for \( \$ 1 \) cash per share. e. Recognized other expenses for \( 2020, \$ 85,000 \), including \( \$ 20,000 \) on credit. f. Collected accounts receivable, \( \$ 24,000 \). g. Purchased additional assets, \( \$ 10,000 \) cash (debit other assets account). h. Paid accounts payable, \( \$ 13,000 \). i. Purchased service supplies on account, \( \$ 18,000 \) (debit to Account No. 03). j. Signed a \( \$ 25,000 \) service contract to start February 1, 2021. \( k \). Declared and paid cash dividend, \( \$ 15,000 \). Data for adjusting entries are as follows: l. Service supplies inventory on hand at December 31, 2020, \$12,000 (debit other expenses account). \( m \). Depreciation on the equipment estimated at \( \$ 6,000 \) per year. n. Accrued interest on notes payable (to be computed). o. Wages earned since the December 24 pay date but not yet paid, \( \$ 15,000 \). \( p \). Income tax expense for 2020 payable in \( 2021, \$ 8,000 \). Required: 1. Set up 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 a statement of earnings (including earnings per share), a statement of changes in equity for 2020, and a statement of financial position at December 31, 2020. 5. Record and post the closing entries. 6. Prepare a post-closing trial balance. 7. Compute the following ratios for 2020 and explain what they mean: a. Current ratio b. Total asset turnover ratio c. Net profit margin ratio d. Return on equity