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Chapter 3: 33PGA_2 (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

Expert verified

Adjusting entries are as follows:

Journal entry

Transactions

Accounts and Explanation

Debit

Credit

(a)

Salaries Expense

$4,800

Salaries Payable

$3200

Cash

$8,000

To record payment of salaries expense

(d)

Unearned Revenue

$3,900

Service Revenue

$3,900

To record service revenue earned that was collected in advance

(g)

Interest Expense

$300

Interest Payable

$250

Cash

$550

To record payment of interest expense

Step by step solution

01

Explanation on Adjustting Entries

Adjusting entries helps in recording the adjustments in the accounts related to accrued revenues and expesnes.

02

Step2:Calculation of Service Revenue Earned our of Advance Received

Service revenue is calculated as follows:

ServiceRevenue=AmountReceived脳PercentagePortionEarned=$6,500脳60%=$3,900

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