Book: Intermediate Accounting by Gordon, Elizabeth

Chapter 4

Question P4

I am having trouble figuring out how and what to adjust. This question is a related question to Question P3

P4-3. Journal Entries; Post to the General Ledger; Prepare a Trial Balance. Herman 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 $250,000 (the par value of the stock) into the business and acquired 25,000 shares of common stock in return. January 15: Herman and Sons' bought an office building in the amount of $80,000. The company took out a long-term note from the bank to finance the purchase. February 12: Herman and Sons" billed clients for $60,000 of services performed. March 1: Herman and Sons' took out a two-year insurance policy, which it paid cash for in the amount of $22,000. March 10: Herman collected $20,000 from clients toward the outstanding accounts receivable balance. May 13: Herman received cash payments totaling $210,000 for legal services $40,000 was for services previ- ously billed to customers on February 12 and the remainder was for services provided in May not yet recorded. June 10: Herman purchased office supplies in the amount of $35,000, all on credit. July 15: Herman paid wages of $16,000 in cash to office staff workers. August 8: Herman paid off the $35,000 balance owed to a supplier for the purchase made on June 10. September 3: Herman and Sons' purchased $25,000 of office supplies in cash. September 20: The company paid $11,000 cash for utilities. October 1: Herman and Sons' paid wages in the amount of $24,000 to office workers. December 1: Herman and Sons" received cash payments from clients in the amount of $320,000 for services to be performed in the upcoming months. December 31: Herman declared and paid a $10,000 dividend. The chart of accounts used by Herman and Sons Law Offices is as follows: Chart of Accounts Group Account # Account Title 100: Assets Cash 102 Accounts Receivable 103 Office Supplies 104 Prepaid Insurance 110 Building 112 Accumulated Depreciation-Building 101 310 Chart of Accounts Group Account # Account Title 200: Liabilities 201 Accounts Payable 202 Unearned Service Revenue 203 Wages Payable 210 Interest Payable 220 Notes Payable 300: Stockholders' Equity 301 Common Stock Retained Earnings 320 Dividends 400: Revenues 401 Service Revenue 500: Expenses 501 Wage Expense Utilities Expense 503 Selling Expense 504 Administrative Expense 505 Insurance Expense 506 Supplies Expense 510 Depreciation Expense-Building Interest Expense 600: Other 601 Income Summary Required a. Journalize the transactions for the year. Omit explanations. b. Post the journal entries to the general ledger. c. Prepare an unadjusted trial balance as of December 31. P4-4. Preparing the Trial Balance; Adjusting Journal Entries; Preparing Financial Statements. Using the information provided in P4-3, perform the following steps: Required 502 520 Required a. Journalize the transactions for the year. Omit explanations. b. Post the journal entries to the general ledger. c. Prepare an unadjusted trial balance as of December 31. P4-4. Preparing the Trial Balance; Adjusting Journal Entries; Preparing Financial Statements. Using the information provided in P4-3, perform the following steps: Required a. Journalize and post adjusting journal entries for Herman and Sons" based on the following 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 basis. A total of $15,000 of office supplies remains on hand at the end of the year. Interest expense in the amount of $7,000 should be accrued on the note payable. Wages in the amount of $32,000 must be accrued at year-end to be paid in January. b. Prepare an adjusted trial balance as of December 31. c. Prepare a single-step income statement, a statement of shareholders' equity, and a balance sheet. P4-5. Closing Process. Using the information in P4-3 and P4-4, perform the following steps for Herman and Sons': Required a. Journalize and post the necessary closing entries at year-end. Omit explanations. b. Prepare a post-closing trial balance as of December 31, 2018. P4-3. Journal Entries; Post to the General Ledger; Prepare a Trial Balance. Herman 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 $250,000 (the par value of the stock) into the business and acquired 25,000 shares of common stock in return. January 15: Herman and Sons' bought an office building in the amount of $80,000. The company took out a long-term note from the bank to finance the purchase. February 12: Herman and Sons" billed clients for $60,000 of services performed. March 1: Herman and Sons' took out a two-year insurance policy, which it paid cash for in the amount of $22,000. March 10: Herman collected $20,000 from clients toward the outstanding accounts receivable balance. May 13: Herman received cash payments totaling $210,000 for legal services $40,000 was for services previ- ously billed to customers on February 12 and the remainder was for services provided in May not yet recorded. June 10: Herman purchased office supplies in the amount of $35,000, all on credit. July 15: Herman paid wages of $16,000 in cash to office staff workers. August 8: Herman paid off the $35,000 balance owed to a supplier for the purchase made on June 10. September 3: Herman and Sons' purchased $25,000 of office supplies in cash. September 20: The company paid $11,000 cash for utilities. October 1: Herman and Sons' paid wages in the amount of $24,000 to office workers. December 1: Herman and Sons" received cash payments from clients in the amount of $320,000 for services to be performed in the upcoming months. December 31: Herman declared and paid a $10,000 dividend. The chart of accounts used by Herman and Sons Law Offices is as follows: Chart of Accounts Group Account # Account Title 100: Assets Cash 102 Accounts Receivable 103 Office Supplies 104 Prepaid Insurance 110 Building 112 Accumulated Depreciation-Building 101 310 Chart of Accounts Group Account # Account Title 200: Liabilities 201 Accounts Payable 202 Unearned Service Revenue 203 Wages Payable 210 Interest Payable 220 Notes Payable 300: Stockholders' Equity 301 Common Stock Retained Earnings 320 Dividends 400: Revenues 401 Service Revenue 500: Expenses 501 Wage Expense Utilities Expense 503 Selling Expense 504 Administrative Expense 505 Insurance Expense 506 Supplies Expense 510 Depreciation Expense-Building Interest Expense 600: Other 601 Income Summary Required a. Journalize the transactions for the year. Omit explanations. b. Post the journal entries to the general ledger. c. Prepare an unadjusted trial balance as of December 31. P4-4. Preparing the Trial Balance; Adjusting Journal Entries; Preparing Financial Statements. Using the information provided in P4-3, perform the following steps: Required 502 520 Required a. Journalize the transactions for the year. Omit explanations. b. Post the journal entries to the general ledger. c. Prepare an unadjusted trial balance as of December 31. P4-4. Preparing the Trial Balance; Adjusting Journal Entries; Preparing Financial Statements. Using the information provided in P4-3, perform the following steps: Required a. Journalize and post adjusting journal entries for Herman and Sons" based on the following 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 basis. A total of $15,000 of office supplies remains on hand at the end of the year. Interest expense in the amount of $7,000 should be accrued on the note payable. Wages in the amount of $32,000 must be accrued at year-end to be paid in January. b. Prepare an adjusted trial balance as of December 31. c. Prepare a single-step income statement, a statement of shareholders' equity, and a balance sheet. P4-5. Closing Process. Using the information in P4-3 and P4-4, perform the following steps for Herman and Sons': Required a. Journalize and post the necessary closing entries at year-end. Omit explanations. b. Prepare a post-closing trial balance as of December 31, 2018