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Magazine Chapter 3: 33PGA_1 (page 169)
Question :Laughter Landscaping has collected the following data for the December 31 adjusting entries: a. Each Friday, Laughter pays employees for the current week鈥檚 work. The amount of the weekly payroll is \(8,000 for a five-day workweek. This year, December 31 falls on a Tuesday. Laughter will pay its employees on January 3. b. On January 1 of the current year, Laughter purchases an insurance policy that covers two years, \)8,000.c. The beginning balance of Office Supplies was \(4,300. During the year, Laughter purchased office supplies for \)5,600, and at December 31 the office supplies on hand total \(1,500. d. During December, Laughter designed a landscape plan and the client prepaid \)6,500. Laughter recorded this amount as Unearned Revenue. The job will take several months to complete, and Laughter estimates that the company has earned 40% of the total revenue during the current year. e. At December 31, Laughter had earned \(3,000 for landscape services completed for Turnkey Appliances. Turnkey has stated that it will pay Laughter on January 10. f. Depreciation for the current year includes Equipment, \)3,000; and Trucks, \(2,200. g. Laughter has incurred \)250 of interest expense on a $550 interest payment due on January 15. Requirements 1. Journalize the adjusting entry needed on December 31 for each of the previous items affecting Laughter Landscaping. Assume Laughter records adjusting entries only at the end of the year. 2. Journalize the subsequent journal entries for adjusting entries a, d, and g.
Short Answer
Adjusting entries are as follows:
Journal entry | |||
Transactions | Accounts and Explanation | Debit | Credit |
(a) | Salaries Expense | $3,200 | |
Salaries Payable | $3,200 | ||
To record accrued salaries expense | |||
(b) | Insurance Expense | $4,000 | |
Prepaid Rent | $4,000 | ||
To record insurance expense | |||
(c) | Supplies Expense | $8,400 | |
Office Supplies | $8,400 | ||
To record office supplies used | |||
(d) | Unearned Revenue | $2,600 | |
Service Revenue | $2,600 | ||
To record service revenue earned that was collected in advance | |||
(e) | Accounts Receivable | $3,000 | |
Service Revenue | $3,000 | ||
To record the service revenue earned | |||
(f) | Depreciation Expense鈥擡quipment | $3,000 | |
Accumulated Depreciation鈥擡quipment | $3,000 | ||
To record depreciation on equipment | |||
Depreciation Expense鈥擳rucks | $2,200 | ||
Accumulated Depreciation鈥擳rucks | $2,200 | ||
To record depreciation on trucks | |||
(g) | Interest Expense | $250 | |
Interest Payable | $250 | ||
To record accrued interest expense |
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