Brothers Herm and Steve Hargenrater began operations of their tool and die shop (H & H Tool) on January 1, 1987, in Meadville, PA. The annual reporting period ends December 31. Assume that the trial balance on January 1, 2023, was as follows:

H & H Tool
Trial Balance on January 1, 2023
(dollars in millions, except par value)
Account Titles	Debit	Credit
Cash	4
Accounts receivable	3
Supplies	12
Land
Equipment	79
Accumulated depreciation (on equipment)		9
Other noncurrent assets (not detailed to simplify)	8
Accounts payable
Wages payable
Interest payable
Dividends payable
Income taxes payable
Long-term notes payable
Common stock (8 million shares, $0.50 par value)		6
Additional paid-in capital		81
Retained earnings		10
Service revenue
Depreciation expense
Supplies expense
Wages expense
Interest expense
Income tax expense
Miscellaneous expenses (not detailed to simplify)
Totals	106	106

Transactions during 2023 follow. All dollars are in millions, except per share amounts:

1. Borrowed $20 cash on a 5-year, 12 percent note payable, dated March 1, 2023.
2. Sold 6 million additional shares of common stock for cash at $1 market value per share on January 1, 2023.
3. Purchased land for a future building site; paid cash,$12.
4. Earned $223 in revenues for 2023, including $50 on credit and the rest in cash.
5. Incurred $90 in wages expense and $26 in miscellaneous expenses for 2023, with $21 on credit and the rest paid in cash.
6. Collected accounts receivable, $35.
7. Purchased other noncurrent assets, $12 cash.
8. Purchased supplies on account for future use, $24.
9. Paid accounts payable, $22.
10. Declared cash dividends on December 1, $22.
11. Signed a three-year $30 service contract to start February 1, 2024.
12. Paid the dividends in (j) on December 31.

Data for adjusting entries:

1. Supplies counted on December 31, 2023, $15.
2. Depreciation for the year on the equipment, $11.
3. Interest accrued on notes payable (to be computed).
4. Wages earned by employees since the December 24 payroll but not yet paid, $14.
5. Income tax expense, $10, payable in 2024.

Requirements

1. General Journal tab-(Step 1) Prepare the journal entries to record the first 12 transactions (transactions (a) through (l)). Review the accounts asshown in the General Ledger and Trial Balance tabs.

(Step 2) Prepare the necessary adjusting entries (13) through (17) (transactions (m) through (q)) to correctly report net income for the period.

(Step 3) After preparing the financial statements, record the closing entry (18). Notice the effect on the trial balance, income statement, and balance sheet tabs once the closing entry is posted.

• 1. Record the borrowed $20 cash on a 5-year, 12 percent note payable, dated March 1, 2023.

• 2.Record the sold 6 million additional shares of common stock for cash at $1 market value per share on January 1, 2023.

• 3.Record the purchased land for a future building site; paid cash, $12.

• 4.Record the earned $223 in revenues for 2023, including $50 on credit and the rest in cash.

• 5.Record the wages expense of $90 and miscellaneous expenses of $26 incurred for 2023, with $21 on credit and the rest paid in cash.

• 6.Record the collected accounts receivable, $35.

• 7.Record the purchased other noncurrent assets, $12 cash.

• 8.Record the purchased supplies on account for future use, $24.

• 9.Record the paid accounts payable, $22.

• 10.Record the $22 cash dividends declared on December 1.

• 11.Record the $22 three-year service contract signed to start February 1, 2024.

• 12.Paid the declared dividends.

• 13.Supplies counted on December 31, 2023, $15. Prepare the adjusting entry needed at December 31.

• 14.Depreciation for the year on the equipment, $11. Prepare the adjusting entry needed at December 31.

• 15.Interest accrued on notes payable (to be computed). Prepare the adjusting entry needed at December 31.

• 16.Wages earned by employees since the December 24 payroll but not yet paid, $14. Prepare the adjusting entry needed at December 31.

• 17.Income tax expense, $10, payable in 2024. Prepare the adjusting entry needed at December 31.

• 18.Record the closing entry. Prepare the adjusting entry needed at December 31.