Question

Harry and Sons’ Law Offices opened on January 1,2018. During the first year of business the company had the following transactions.

January 2: The owners Invested 300,000 (the par value of the stock) into the business and acquired 30,000 shares of common stock in return.

January 15: Harry and Sons’ bought an office building in the amount of $85,000. The company took out a long-term note from the bank to finance the purchase.

February 12: Harry and Son’ billed clients for $85,000 of services performed.

March 1: Harry and Sons’ took out a two-year insurance policy, which it paid cash for in the amount of $18,000.

March 10: harry collected $30,000 from clients toward the outstanding accounts receivable balance.

May 13: Harry received cash payments totaling $270,000 for legal services-$55,000 was for services previously billed to customers on February 12 and the remainder was for services provided in May not yet recorded.

June 10: Harry purchased office supplies in the amount of $25,000, all on credit.

July 15: Harry paid wages of $24,000 in cash to office staff workers.

August 8: Harry paid off the $25000 balance owed to a supplier for the purchase made June 10.

September 3:Harry and Sons’ purchased $5,000 of office supplies in cash.

September 20: The company paid $14,000 cash for utilities.

October 1: Harry and Sons’ paid wages in the amount of $22,000 to office workers.

December 1: Harry and Sons’ received cash payments from clients in the amount of $310,000 for services to be performed in the upcoming months.

December 31: Harry declared and paid a $18,000 dividend.

*Additional Information

• Of the cash payments received from customers on December 1, half of these services were performed in December and half relates to future services to be rendered in the following year.   

• Ten months of the insurance policy expired by the end of the year.

• Depreciation for the full year should be recorded on the building purchased. the building has a 20-year life and no residual value. Depreciation will be recorded on a straight-line bases.

• A total of $12,000 of office supplies remains on hand at the end of the year.

• Interest Expense in the amount of $4,250 should be accrued on the note payable.

• Wages in the amount of $48,000 must be accrued at year end to be paid in January.

Harry’s Unadjusted Trial Balance at December 31,2018 is as follows.

Unadjusted Trial Balance

At December 31,2018

Account Debit Credit

Cash $784,000

Office Supplies 30,000

Prepaid Insurance 18,000

Building 85,000

Unearned Service Revenue $310,000

Notes Payable 85,000

Common Stock 300,000

Dividends 18,000

Service Revenue 300,000

Wage Expense 46,000

Utilites Expense 14,000

Total: $995,000 $995,000

Requirements

A) Journalize and post adjusting journal entries for Harry and Sons’.

B) Post the adjusting Journal entries to the T-accounts to obtain the adjusted balances.

C) Prepare a Single-Step Income Statement, Statement of Shareholders Equity, and a Balance Sheet.

Answer 1