Third Example: A Service Company started operations on January 1, 2011 and the following are the transactions occurred in its first year of business.

Jan. 1 the company started by a cash investment of $337,000

Jan. 1 the company paid $71,000 for 2011 and part of 2012 rent.

Jan. 1 the company paid $48,000 for insurance policy covering 4-year period.

Feb. 2 the company purchased office supplies of $14,000 on account.

Mar. 1 the company received $120,000 cash in exchange for consulting services that are going to be provided to Amman Co. in April 2011 and August 2012

Nov. 30 paid the following expenses in cash

$165,000 salaries

$700 utilities

Dec. 15 billed Irbid Co. $75,000 for consulting services provided.

The company prepares annual financial statements, and the following adjustments have been gathered on December 31, 2011

- Office supplies on hand were $4,000

- Monthly rent is $3,000

- $60,000 worth of service revenue has been earned.

- Unpaid salaries were $15,000

- Interest earned but not recorded was $1,500

- 12-month worth of insurance has expired.

Instructions:

1- Journalize the transactions above and post them to the appropriate accounts.

2- Prepare the trial balance.

3- Prepare the adjusting entries and post them to the appropriate accounts.

4- Prepare the adjusted trial balance.

5- Prepare the statements of income, retained earnings and financial position.

6- Prepare Closing Entries.

7- Prepare Post-Closing trial balance (opening balances for the next period)

Third Example Continued:

During 2012, the following transactions occurred:

May 1 collected the outstanding balance on Irbid Co. account.

Sep. 1 the remaining $60,000 worth of service revenue has been earned.

Oct. 8 paid $20,000 cash for new office supplies and in payment of the outstanding balance of supplies accounts payable.

Nov. 15 paid $680 for utilities expense.

Dec. 31 paid $195,000 for 2012 salaries and 2011 accrued salaries.

At the end of 2012, the following information have been gathered on December 31, 2012,

- Office supplies on hand were $4,000.

- No rent was paid.

- The Insurance policy covers 4 years starting from 1/1/2011.

Instructions:

1- Journalize the transactions above and post them to the appropriate accounts.

2- Prepare the trial balance.

3- Prepare the adjusting entries and post them to the appropriate accounts.

4- Prepare the adjusted trial balance.

5- Prepare the statements of income, retained earnings and financial position.

6- Prepare Closing Entries.

7- Prepare Post-Closing trial balance (opening balances for the next period)