COMP$41$ 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 $1,2022.$ The company$$s fiscal year ends on December $31.$ The closing trial balance on December $31,2022,$ follows:

Table Summary: A table for recording transactions, preparing a complete set of financial statements, and performing ratio analysis. The columns read account no$.,$ account titles, debit, and credit.

Account No$.$ Account Titles Debit Credit

$01$ Cash $$3,000$

$02$ Accounts receivable $5,000$

$03$ Service supplies inventory $12,000$

$04$ Land

$05$ Equipment $60,000$

$06$ Accumulated depreciation $($equipment$)$ $$6,000$

$07$ Other assets $($not detailed, to simplify$)4,000$

$11$ Accounts payable $5,000$

$12$ Notes payable

$13$ Wages payable

$14$ Interest payable

$15$ Income taxes payable

$21$ Contributed capital $(65,000$ shares$)65,000$

$31$ Retained earnings $8,000$

$35$ Service revenue

$40$ Depreciation expense

$41$ Income tax expense

$42$ Interest expense

$43$ Other expenses

Totals $$84,000$ $$84,000$

Transactions and events during $2023$ are as follows:

Borrowed $$10,000$ cash on a $6$ percent note payable, dated March $1,2023.$

Purchased land for future building site; paid cash, $$9,000.$

Earned revenues for $2023$ of $$160,000,$ including $$50,000$ on credit.

Sold $3,000$ additional shares for $$1$ cash per share.

Recognized other expenses for $2023,$ $$85,000,$ including $$20,000$ on credit.

Collected accounts receivable, $$24,000.$

Purchased additional assets, $$10,000$ cash $($debit other assets account$).$

Paid accounts payable, $$13,000.$

Purchased service supplies on account, $$18,000($debit to Account No$.03).$

Signed a $$25,000$ service contract to start February $1,2024.$

Declared and paid cash dividend, $$15,000.$

Data for adjusting entries are as follows:

Service supplies inventory on hand at December $31,2023,$ $$12,000($debit other expenses account$).$

Depreciation on the equipment estimated at $$6,000$ per year.

Accrued interest on notes payable $($to be computed$).$

Wages earned since the December $24$ pay date but not yet paid, $$15,000.$

Income tax expense for $2023$ payable in $2024,$ $$8,000.$

Required:

Set up T$-$accounts for the accounts on the trial balance and enter their beginning balances.

Record transactions $($a$)$ through $($k$)$ and post them to the T$-$accounts.

Record and post the adjusting entries $($l$)$ through $($p$).$

Prepare a statement of earnings $($including earnings per share$),$ a statement of changes in equity for $2023,$ and a statement of financial position at December $31,2023.$

Record and post the closing entries.

Prepare a post$-$closing trial balance.

Compute the following ratios for $2023$ and explain what they mean:

Current ratio

Total asset turnover ratio

Net profit margin ratio

Return on equity