Chapter 3, Problem 3.39BP

Journalizing adjusting entries and subsequent journal entries

Lorring Landscaping has the following data for the December 31 adjusting entries:

a. Each Friday, Lorring pays employees for the current week’s work. The amount of the weekly payroll is $6,000 for a five-day workweek. This year, December 31 falls on a Tuesday. Lorring will pay its employees on January 3.

b. On January 1 of the current year, Lorring purchases an insurance policy that covers two years, $4,000.

c. The beginning balance of Office Supplies was $4,100. During the year, Lorring purchased office supplies for $5,500, and at December 31 the office supplies on hand total $2,200.

d. During December, Lorring designed a landscape plan and the client prepaid $4,000. Lorring recorded this amount as Unearned Revenue. The job will take several months to complete, and Lorring estimates that the company has earned 50% of the total revenue during the current year.

e. At December 31, Lorring had earned $4,500 for landscape services completed for Tomball Appliances. Tomball has stated that it will pay Lorring on January 10.

f. Depreciation for the current year includes Equipment, $3,000; and Trucks, $1,700.

g. Lorring has incurred $800 of interest expense on a $1,200 interest payment due on January 15.

Requirements

1. Journalize the adjusting entry needed on December 31 for each of the previous items affecting Lorring Landscaping. Assume Lorring records adjusting entries only at the end of the year.

2. Journalize the subsequent journal entries for adjusting entries a, d, and g.