Question
Brothers Harry and Herman Hausyerday began operations of their machine shop (H & H Tool, Inc.) on January 1, 2016. The annual reporting period ends
Brothers Harry and Herman Hausyerday began operations of their machine shop (H & H Tool, Inc.) on January 1, 2016. The annual reporting period ends December 31. The trial balance on January 1, 2018, follows (the amounts are rounded to thousands of dollars to simplify):
Account Titles | Debit | Credit | ||||
Cash | $ | 4 | ||||
Accounts Receivable | 4 | |||||
Supplies | 11 | |||||
Land | 0 | |||||
Equipment | 56 | |||||
Accumulated Depreciation | $ | 7 | ||||
Software | 17 | |||||
Accumulated Amortization | 4 | |||||
Accounts Payable | 6 | |||||
Notes Payable (short-term) | 0 | |||||
Salaries and Wages Payable | 0 | |||||
Interest Payable | 0 | |||||
Income Tax Payable | 0 | |||||
Common Stock | 68 | |||||
Retained Earnings | 7 | |||||
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 | $ | 92 | $ | 92 | ||
Transactions and events during 2018 (summarized in thousands of dollars) follow:
Borrowed $13 cash on March 1 using a short-term note.
Purchased land on March 2 for future building site; paid cash, $7.
Issued additional shares of common stock on April 3 for $28.
Purchased software on July 4, $12 cash.
Purchased supplies on account on October 5 for future use, $17.
Paid accounts payable on November 6, $14.
Signed a $30 service contract on November 7 to start February 1, 2019.
Recorded revenues of $152 on December 8, including $36 on credit and $116 collected in cash.
Recognized salaries and wages expense on December 9, $81 paid in cash.
Collected accounts receivable on December 10, $20.
Data for adjusting journal entries as of December 31:
Unrecorded amortization for the year on software, $4.
Supplies counted on December 31, 2018, $11.
Depreciation for the year on the equipment, $7.
Interest of $2 to accrue on notes payable.
Salaries and wages earned but not yet paid or recorded, $13.
Income tax for the year was $9. It will be paid in 2019.
9-a. How much net income did H & H Tool, Inc., generate during 2018? What was its net profit margin?
9-b. Is the company financed primarily by liabilities or stockholders equity?
9-c. What is its current ratio?
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