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Grasshopper Lawn Service provides general lawn maintenance to customers. The company’s fiscal year-end is December 31. Information necessary to prepare the year-end adjusting entries appears below.
On October 1, 2021, Grasshopper lent $110,000 to another company. A note was signed with principal and 8% interest to be paid on September 30, 2022.
On November 1, 2021, the company paid its landlord $22,500 representing rent for the months of November through January. Prepaid Rent was debited for the entire amount.
On August 1, 2021, Grasshopper collected $27,000 in advance rent from another company that is renting a portion of Grasshopper’s building. The $27,000 represents one year’s rent, and the entire amount was credited to Deferred Revenue.
Depreciation for the year is $23,000.
Vacation pay for the year that had been earned by employees but not paid to them or recorded is $13,000. The company records vacation pay as Salaries Expense.
Grasshopper began the year with $27,000 in its Supplies account. During the year $67,000 in supplies were purchased and debited to the Supplies account. At year-end,supplies costing $27,000 remain on hand.
Required:
Prepare the necessary adjusting entries on December 31, 2021.

Respuesta :

Answer and Explanation:

The Journal entry is shown below:-

1. Interest receivable $2,200 ($110,000 × 8% × 3 ÷ 12)

             To Interest income $2,200

(Being interest income accrued is recorded)

2. Rent expense Dr, $15,000 ($22,500 × 2 ÷ 3)

               To Prepaid rent $15,000

(Being expiry of prepaid rent is recorded)

3. Deferred revenue Dr, $11,250    (27000 × 5 ÷ 12)

           To Rent income $11,250

(Being rental income earned is recorded)

4. Depreciation expense Dr, $23,000

         To Accumulated depreciation $23,000

(Being depreciation expense is recorded)

5. Salaries expense Dr, $13,000

           To Salaries payable $13,000

(Being accrued vacation pay is recorded)

6. Supplies expense Dr, $67,000 ($27,000 + $67,000 - $27,000)

        To Supplies $67,000

(Being supplies used is recorded)

anthougo

The preparation of the year-end adjusting entries for Grashopper Lawn Services is as follows:

Adjusting Journal Entries:

Debit Interest Receivable $2,200

Credit Interest Revenue $2,200

Debit Rent Expense $15,000

Credit Prepaid Rent $15,000

Debit Deferred Revenue $11,250

Credit Rent Revenue $11,250

Debit Depreciation Expense $23,000

Credit Accumulated Depreciation $23,000

Debit Salaries Expense $13,000

Credit Vacation Payable $13,000

Debit Supplies Expenses $67,000

Credit Supplies $67,000

Data Analysis:

Interest Receivable $2,200 Interest Revenue $2,200

($110,000 x 8% x 3/12)

Rent Expense $15,000 Prepaid Rent $15,000

($22,500 x 2/3)

Deferred Revenue $11,250 Rent Revenue $11,250

($27,000 x 5/12)

Depreciation Expense $23,000 Accumulated Depreciation $23,000

Salaries Expense $13,000 Vacation Payable $13,000

Supplies Expenses $67,000 Supplies $67,000

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