Question

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.

Answer 1

Adjusting entry

Date	account and explanation	Debit	Credit
Dec 31	Interest receivable (110000*8%*3/12)	2200
	Interest revenue		2200
Dec 31	rent expense (22500/3*2)	15000
	Prepaid rent		15000
Dec 31	Deferred revenue (27000/12*5)	11250
	Rent revenue		11250
Dec 31	Depreciation expense	23000
	Accumulated depreciation		23000
Dec 31	Salaries expense	13000
	Salaries payable		13000
Dec 31	Supplies expense (27000+67000-27000)	67000
	Supplies		67000