Question

Laroche Landscaping has collected the following data for the December 31 adjusting entries:

a. Each Friday, Laroche pays employees for the current week's work. The amount of the weekly payroll is $7,500 for a five-day workweek. This year, December 31 falls on a Wednesday. Laroche will pay its employees on January 2.
b. On January 1 of the current year, Laroche purchases an insurance policy that covers two years, $2,500.
c. The beginning balance of Office Supplies was $3,900. During the year, Laroche purchased office supplies for $5,400, and at December 31 the office supplies on hand total $2,600.
d. During December, Laroche designed a landscape plan and the client prepaid $5,000. Laroche recorded this amount as Unearned Revenue. The job will take several months to complete, and Laroche estimates that the company has earned 60% of the total revenue during the current year.
e. At December 31, Laroche had earned $4,500 for landscape services completed for Turnkey Appliances. Turnkey has stated that it will pay Laroche on January 10.
f. Depreciation for the current year includes Equipment, $3,300; and Trucks, $2,100.
g. Laroche has incurred $400 of interest expense on a $900 interest payment due on January 15.
Requirements
1. Journalize the adjusting entry needed on December 31 for each of the previous
items affecting Laroche Landscaping. Assume Laroche records adjusting entries
only at the end of the year. 2. Journalize the subsequent journal entries for adjusting entries a, d, and g

Answer 1

Adjusting entries are required to account for wages payable, prepaid insurance, office supplies used, unearned revenue, revenue earned but not received, depreciation, and interest expense. Subsequent entries are needed after the year-end to reflect actual payment of wages, earning of unearned revenue, and payment of interest.

Step-by-step explanation:

The question involves preparing adjusting entries for Laroche Landscaping at the end of the year and journalizing subsequent entries for selected adjustments. Given the information, the entries are as follows:

1. Wages Payable: To recognize the unpaid wages ($7,500/5 days * 3 days = $4,500), the entry would be to debit Salaries Expense and credit Wages Payable for $4,500.
2. Prepaid Insurance: To account for one year's worth of insurance expense ($2,500/2 years = $1,250), debit Insurance Expense and credit Prepaid Insurance for $1,250.
3. Office Supplies: Calculating the amount of supplies used ($3,900 beginning balance + $5,400 purchases - $2,600 ending balance = $6,700), the entry would be to debit Office Supplies Expense and credit Office Supplies for $6,700.
4. Unearned Revenue: To recognize the revenue earned from the prepaid landscape plan ($5,000 * 60% = $3,000), the entry would be to debit Unearned Revenue and credit Landscape Revenue for $3,000.
5. Accounts Receivable: To record the revenue earned but not yet received ($4,500 from Turnkey Appliances), the entry would be to debit Accounts Receivable and credit Landscape Revenue for $4,500.
6. Depreciation: To record depreciation on equipment and trucks ($3,300 + $2,100 = $5,400), the entry would be to debit Depreciation Expense and credit Accumulated Depreciation for $5,400.
7. Interest Expense: To recognize the interest incurred but not paid ($400), the entry would be to debit Interest Expense and credit Interest Payable for $400.

Subsequent entries:

1. For adjusting entry a, on January 2: debit Wages Payable and credit Cash for $4,500.
2. For adjusting entry d, as the work progresses, debit Unearned Revenue and credit Landscape Revenue for the portion of work completed.
3. For adjusting entry g, on January 15: debit Interest Payable and credit Cash for $900.