6 C4-2 (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] Skip to question [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: Borrowed $11 cash on March 1 using a short-term note. Purchased land on March 2 for future building site; paid cash, $8. Issued additional shares of common stock on April 3 for $30. Purchased software on July 4, $11 cash. Purchased supplies on account on October 5 for future use, $19. Paid accounts payable on November 6, $12. Signed a $20 service contract on November 7 to start February 1, 2022. Recorded revenues of $148 on December 8, including $34 on credit and $114 collected in cash. Recognized salaries and wages expense on December 9, $79 paid in cash. Collected accounts receivable on December 10, $18. Data for adjusting journal entries as of December 31: Unrecorded amortization for the year on software, $6. Supplies counted on December 31, 2021, $12. Depreciation for the year on the equipment, $5. Interest of $1 to accrue on notes payable. Salaries and wages earned but not yet paid or recorded, $11. Income tax for the year was $7. It will be paid in 2022. C4-2 (Algo) Part 7
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
6
C4-2 (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]
Skip to question
[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
| Account Titles | Debit | Credit |
|---|---|---|
| Cash | $ 2 | |
| Accounts Receivable | 6 | |
| Supplies | 13 | |
| Land | 0 | |
| Equipment | 54 | |
| $ 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 | |
| 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:
- Borrowed $11 cash on March 1 using a short-term note.
- Purchased land on March 2 for future building site; paid cash, $8.
- Issued additional shares of common stock on April 3 for $30.
- Purchased software on July 4, $11 cash.
- Purchased supplies on account on October 5 for future use, $19.
- Paid accounts payable on November 6, $12.
- Signed a $20 service contract on November 7 to start February 1, 2022.
- Recorded revenues of $148 on December 8, including $34 on credit and $114 collected in cash.
- Recognized salaries and wages expense on December 9, $79 paid in cash.
- Collected accounts receivable on December 10, $18.
Data for adjusting journal entries as of December 31:
- Unrecorded amortization for the year on software, $6.
- Supplies counted on December 31, 2021, $12.
- Depreciation for the year on the equipment, $5.
- Interest of $1 to accrue on notes payable.
- Salaries and wages earned but not yet paid or recorded, $11.
- Income tax for the year was $7. It will be paid in 2022.
C4-2 (Algo) Part 7
Required:
- Prepare the closing
journal entry . (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in thousands of dollars.)
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