Leonard & Co. is an architecture firm with offices in several of the larger cities in the southeastern US. Leonards fiscal year-end is December 31, and it prepares financial statements just once a year, at year-end. For bookkeeping purposes, Leonard has adopted a policy to record payments and collections in advance into asset and liability accounts, respectively. The companys unadjusted trial balance at December 31, 2019 is shown below. All accounts have normal-side balances.

Accounts Payable $ 303,160

Accounts Receivable 791,715

Accumulated Depreciation Buildings 254,100

Accumulated Depreciation Equipment 146,700

Advertising Expense 83,490

Allowance for Doubtful Accounts 11,294

Buildings 1,052,000

Cash 694,783

Common Stock ($1 par) 178,650

Dividends 156,800

Equipment 489,600

Insurance Expense 173,485

Interest Expense 16,310

Land 318,765

Notes Payable 536,000

Prepaid Advertising 71,244

Retained Earnings 821,400

Salaries and Wages Expense 2,853,120

Service Revenue 4,671,050

Travel Expense 98,395

Unearned Rent Revenue 46,824

Utilities Expense 169,471

Additional information available at year-end is as follows:

1. Leonard performed $276,345 of architectural services for several clients in December 2019 that it has not yet billed, recorded or collected.

2. Leonard purchased its buildings in 2008 and its equipment in 2015. Leonard depreciates its fixed assets according to the straight-line method. For the buildings, it uses estimates of 35 years for the useful life and $205,000 for the salvage value. For the equipment, it uses estimates of 12 years for the useful life and $49,500 for the salvage value.

3. Leonard operates 5 days a week, Mondays through Fridays. Employees are paid each Thursday, for hours worked through the previous Friday. On Thursday, December 26, 2019, the last payday in 2019, Leonard paid its employees for hours worked during the week of December 16-20. The employees then worked their regular schedule through the end of the year. Note that Christmas Day is a paid holiday for all employees. Leonards payroll averages $11,720 per day.

4. On November 11, 2019, Leonard paid $71,244 for ads to run evenly over a 9-month period, starting December 1, 2019.

5. Leonard estimates that 7.98% of the 2019 year-end accounts receivable balance will not be collected.

6. On April 1, 2019, Leonard purchased a 15-month insurance policy for $151,485 and paid the full cost of the policy in advance. The policy provides coverage through June 30, 2020. Note Contrary to the companys normal practice, Leonards bookkeeper recorded the prepayment into the Insurance Expense account. Give the adjusting entry needed when a company uses the expense approach to record a payment in advance.

7. In the first week of January 2020, Leonard received bills for December 2019 utilities totaling $17,265. The company paid all of these bills in late January 2020.

8. Leonard sometimes leases unused space in its buildings to other businesses. On September 1, 2019, a new tenant signed a 2-year lease and paid the first 6 months rent of $46,824 in advance. The lease began on that date and runs through August 31, 2021.

9. The Notes Payable balance relates to a bank loan obtained in 2018 that is payable in full on May 31, 2022. The loan agreement specifies that Leonard pay interest annually on May 31 at the rate of 6.35%. Leonards bookkeeper made the proper entry for the first interest payment, on May 31, 2019. (Hint Think about the entry Leonard made on the first interest payment date.)

Instructions

Complete the following three tasks relating to Leonard & Co.s accounting process at year-end 2019:

(a) Prepare an unadjusted trial balance as of December 31, 2019. List the accounts in an appropriate trial balance order.

(b) Prepare the adjusting journal entries needed at December 31, 2019.

(c) Prepare an adjusted trial balance as of December 31, 2019. List the accounts in an appropriate trial balance order.