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Accounting Cycle Project

Intermediate Accounting
Accounting Cycle Project
You have been engaged to perform accounting services for Herman and Sons Law
Offices. Your responsibilities include maintaining all accounting records and preparing
annual financial statements. Herman and Sons opened on January 1, 2015. During the
year, the firm had the following transactions:
1. January 2: The owners invested $200,000 into the business and acquired 25,000
shares of capital stock in return.
2. January 15: Herman and Sons took out a note for $80,000 from the bank to
finance the purchase of an office building.
3. January 15: Herman and Sons bought an office building in the amount of
$80,000.
4. February 12: Herman and Sons billed clients for $90,000 of services performed.
5. March 1: Herman and Sons took out a twoyear insurance policy, which it paid
cash for in the amount of $18,000.
6. March 10: Herman collected $12,000 from clients toward the outstanding
accounts receivable balance.
7. May 13: Herman received cash payments totaling $185,000 for legal services
$30,000 was for services previously billed to customers on February 12 and the
remainder was for services provided in May not yet recorded.
8. June 10: Herman purchased office supplies in the amount of $15,000, all of which
it paid on credit account with the supplier.
9. July 15: Herman paid wages of $42,000 in cash to office staff workers.
10. August 8: Herman paid the $10,000 owed to a supplier for the purchase made on
June 10.
11. September 3: Herman and Sons purchased $17,000 of office supplies in cash.
12. September 20: The company paid $9,000 cash for utilities.
13. October 1: Herman and Sons paid wages in the amount of $32,000 to office
workers.
14. 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.
15. December 31: Herman declared and paid a $7,000 dividend.
Your first step is to analyze each transaction during Herman and Sons first year of
business and enter them into the accounting system. Specifically, you first perform the
following tasks.
a. Journalize the transactions for the year.
b. Post the transactions to the general ledger.
c. Prepare an unadjusted trial balance as of December 31.
Next, you begin to prepare the annual financial statements. Before preparing the
statements, you identify the following additional information