Question: P3-33A Journalizing adjusting entries and subsequent journal entries Laughter Landscaping has collected the following data for the December 31 adjusting entries:
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. Laughter will pay its employees on January 2.
b. On January 1 of the current year, Laughter purchases an insurance policy that covers two years, $9,000.
c. The beginning balance of Office Supplies was $4,000. During the year, Laughter purchased office supplies for $5,200, and at December 31 the office supplies on hand total $2,400.
d. During December, Laughter designed a landscape plan and the client prepaid $7,000. 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 $3,500 for landscape services completed for Turnkey Appliances. Turnkey has stated that they will pay Laughter on January 10.
f. Depreciation for the current year includes Equipment, $3,700; and Trucks, $1,300.
g. Laughter has incurred $300 of interest expense on a $450 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.
Part 2: Preparing financial statements including a classified balance sheet in report form, preparing closing entries, and using the current ratio to
evaluate a company Learning Objectives 1, 3, 6 Ending Capital $74,900
The adjusted trial balance of Blume Irrigation System at December 31, 2014, Follows:
BLUME IRRIGATION SYSTEM
Adjusted Trial Balance
December 31, 2014
|
|
Balance
|
|
Account Title
|
Debit
|
Credit
|
|
Cash
|
$11,000
|
|
|
Accounts Receivable
|
43,100
|
|
|
Office Supplies
|
3,300
|
|
|
Prepaid Insurance
|
4,000
|
|
|
Equipment
|
23,000
|
|
|
Accumulated Depreciation-Equipment
|
|
$ 7,900
|
|
Building
|
55,800
|
|
|
Accumulated Depreciation-Building
|
|
24,000
|
|
Accounts Payable
|
|
24,700
|
|
Interest Payable
|
|
400
|
|
Salaries Payable
|
|
3,900
|
|
Unearned Revenue
|
|
1,600
|
|
Notes Payable (long-term)
|
|
2,800
|
|
Blume, Capital
|
|
25,000
|
|
Blume, Withdrawals
|
2,000
|
|
|
Service Revenue
|
|
74,800
|
|
Insurance Expense
|
900
|
|
|
Salaries Expense
|
16,300
|
|
|
Supplies Expense
|
1,500
|
|
|
Interest Expense
|
400
|
|
|
Depreciation Expense-Equipment
|
2,000
|
|
|
Depreciation Expense-Building
|
1,800
|
|
|
Total
|
$165,100
|
165,100
|
Requirements: 1. Prepare the company's income statement for the year ended December 31, 2014.
2. Prepare the company's statement of owner's equity for the year ended December 31, 2014. Assume that there were no contributions made by the owner during the year.
3. Prepare the company's classified balance sheet in report form at December 31, 2014.
4. Journalize the closing entries for Blume Irrigation System.
5. Compute the company's current ratio at December 31, 2014. At December 31, 2013, the current ratio was 1.81. Did the company's ability to pay debts improve or deteriorate, or did it remain the same?