ABC Architects, Inc. has been in business since 2010. The Companys post-closing trial balance as of December 31, 2017 (the previous year) is given below.

Account	DR	CR
Cash	$34,000
Accounts receivable	48,000
Drafting supplies	21,000
Prepaid insurance	6,000
Prepaid rent	4,000
Equipment	31,000
Accumulated depreciation		$4,000
Accounts payable		7,000
Salaries payable		2,000
Unearned fees		5,000
Long-term notes payable		0
Common stock		50,000
Retained earnings		76,000
	$144,000	$144,000

ABC had the following transactions during 2018 (not in date order):

ABC collected $72,000 on accounts receivable throughout the year.

b. The company created architectural renderings for clients totaling $112,000 in fees earned. $70,000 was collected in cash, with the remainder on account.

c. ABC purchased $70,000 worth of supplies during the year. $20,000 was paid in cash and the remainder was purchased on account. Record the purchase in the Supplies Expense account

d. The company paid $47,000 on accounts payable during the year.

e. On August 1 ABC paid its $24,000 annual insurance premium. The payment is for insurance coverage from August 1, 2018 to July 31, 2019. Record this payment as Prepaid Insurance.

f. During the year ABC paid $18,000 of rent for office space. Record this payment as Rent Expense.

g. ABC paid its employees total cash salaries of $41,000. This includes the amount owed for salaries at the beginning of the year.

h. On April 1 the company purchased a new computer design system for $30,000. $5,000 was paid in cash and the company issued a long-term note with an 8% annual interest rate for the balance.

i. Pronto paid cash dividends to shareholders totaling $4,000.

Instructions

1. Prepare the Journal entry for each transaction (a i) in the journal (Journal tab of the Working Papers). The first transaction is journalized and posted for you.

2. Post the journalized transactions to the general ledger (T-accounts), identifying the transactions using their respective letters a. thru i. (Ledger tab of the Working Papers). Transaction a. has been posted.

3. After computing balances in the ledger, prepare a trial balance as of December 31, 2018 (Trial Balances & Statements tab of the Working Papers). Column balances should equal $282,000.

4. Using the adjustment data below, prepare adjusting entries (Journal tab of the Working Papers).

j. ABC completed and delivered the architectural renderings for which they had been paid during 2017.

k. At December 31 there were Supplies that cost $34,000 left on hand.

l. $11,000 of the cash received for printing jobs in transaction b. had not been earned by December 31, 2018. It was for work that ABC would complete during 2019.

m. Interest should be accrued on the note in transaction h. The note was issued on April 1 and carries an annual interest rate of 8%.

n. Rent expense for 2018 was $7,000.

o. Prepaid insurance at the beginning of the year has completely expired. In addition, the premium payment made in transaction e was made on August 1 and covers 12 months. As a result, the part of that payment that relates to August 1 through December 31, 2018 has also expired. Your adjusting entry should record the expiration of the prior year prepaid insurance as well as the amount of the current year premium that has expired.

p. Depreciation on the equipment is $8,000 for the year.

q. At the end of the year, ABC had provided $15,000 of services which had not been billed or recorded yet.

r. Salaries of $4,000 were owed to employees at year-end (earned by employees but not paid).

5. Post the adjusting entries to the general ledger (Ledger tab of the Working Papers) and enter the adjusted balances in each account. Prepare an adjusted trial balance as of December 31, 2018 (Trial Balances & Statements tab of the Working Papers).

6. Prepare an Income Statement, Statement of Retained Earnings, and Balance Sheet (Trial Balances & Statements tab of the Working Papers). Use proper headings, $ signs, underlines, and other formats based on the handouts we went over in class or in the book. The ending balance in Retained Earnings should be $60,500. No abbreviations on formal financial statements. Be sure to separate current assets from long term assets, and current liabilities from long term liabilities on the Balance Sheet. Show subtotals for each category.

7. Prepare closing entries (Journal tab of the Working Papers) and post them to the general ledger (Ledger tab of the Working Papers). Show ending balances in all ledger accounts.

8. Prepare a post-closing trial balance (Trial Balances & Statements tab of the Working Papers).