This post addresses journal entries needed for each point.
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Laughter Landscaping has the following independent cases at the end of the year on December 31, 2014.
a. Each Friday, Laughter pays employees for the current week's work. The amount of the weekly payroll is $7,000 for a five-day workweek. This year December 31 falls on a Wednesday.
a. Details of Prepaid insurance are shown in the account:
PREPAID INSURANCE
Jan 1 $4,500
Laughter prepays a full year's insurance each year on January 1. Record insurance expense for the year ended December 31.
c. The beginning balance of Supplies was $4,000. During the year, Laughter purchased supplies for $5,200, and at December 31 the supplies on hand total $2,400.
d. Laughter designed a landscape plan, and the client paid Laughter $7,000 at the start of the project. Laughter recorded this amount as Unearned service revenue. The job will take several months to complete, and Laughter estimates that the company has earned 60% of the total revenue during the current year.
e. Depreciation for the current year includes Equipment, $3,700; and Trucks, $1,300. Make a compound entry.
Requirement
1. Journalize the adjusting entry needed on December 31, 2014, for each of the previous items affecting Laughter Landscaping
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Solution Summary
The solution provides the journal entries that are needed for each scenario listed, including prepaid insurance, revenue, and depreciation for Laughter Landscaping.
Solution Preview
a. Each Friday, Laughter pays employees for the current week's work. The amount of the weekly payroll is $7,000 for a five-day workweek. This year December 31 falls on a Wednesday.
Adjusting entry on 12/31:
Payroll expense 1,400
Accrued payroll 1,400
Laughter prepays a full year's insurance each year on ...
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