Question

Michael 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 $ 350 comma 000$350,000 ​(the par value of the​ stock) into the business and acquired 35 comma 00035,000 shares of common stock in return.
times•	January​ 15: MichaelMichael and​ Sons' bought an office building in the amount of $ 95 comma 000$95,000. The company took out a​ long-term note from the bank to finance the purchase.
times•	February​ 12: MichaelMichael and​ Sons' billed clients for $ 85 comma 000$85,000 of services performed.
times•	March​ 1: MichaelMichael and​ Sons' took out a​ two-year insurance​ policy, which it paid cash for in the amount of $ 23 comma 400$23,400.
times•	March​ 10: MichaelMichael collected $ 26 comma 000$26,000 from clients toward the outstanding accounts receivable balance.
times•	May​ 13: MichaelMichael received cash payments totaling $ 230 comma 000$230,000 for legal serviceslong dash—$ 59 comma 000$59,000 was for services previously billed to customers on February 12 and the remainder was for services provided in May not yet recorded.
times•	June​ 10: MichaelMichael purchased office supplies in the amount of $ 15 comma 000$15,000​, all on credit.
times•	July​ 15: MichaelMichael paid wages of $ 12 comma 000$12,000 in cash to office staff workers.
times•	August​ 8: MichaelMichael paid off the $ 15 comma 000$15,000 balance owed to a supplier for the purchase made on June 10.
times•	September​ 3: MichaelMichael and​ Sons' purchased $ 50 comma 000$50,000 of office supplies in cash.
times•	September​ 20: The company paid $ 15 comma 000$15,000 cash for utilities.
times•	October​ 1: MichaelMichael and​ Sons' paid wages in the amount of $ 32 comma 000$32,000 to office workers.
times•	December​ 1: MichaelMichael and​ Sons' received cash payments from clients in the amount of $ 290 comma 000$290,000 for services to be performed in the upcoming months.
times•	December​ 31: MichaelMichael declared and paid a $ 14 comma 000$14,000 dividend.

Michael and Sons' Law Offices

Unadjusted Trial Balance

At December 31, 2018

Account

Debit

Credit

Cash

$734,600

Office Supplies

65,000

Prepaid Insurance

23,400

Building

95,000

Unearned Service Revenue

$290,000

Notes Payable

95,000

Common Stock

350,000

Dividends

14,000

Service Revenue

256,000

Wage Expense

44,000

Utilities Expense

15,000

Total

$991,000

$991,000

a.	Journalize and post adjusting journal entries for MichaelMichael and​ Sons' based on the following additional​ information:
	times•	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.
	times•	Ten months of the insurance policy expired by the end of the year.
	times•	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.
	times•	A total of $ 18 comma 000$18,000 of office supplies remains on hand at the end of the year.
	times•	Interest expense in the amount of $ 7 comma 600$7,600 should be accrued on the note payable.
	times•	Wages in the amount of $ 24 comma 000$24,000 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.

Answer 1