Question

The Lawn Care Inc. began operations on April 1. At April 30, the trial balance shows the following balances for selected accounts. Prepaid Insurance Equipment Notes Payable Unearned Service Revenue Service Revenue $3,600 27,000 18,000 4,200 1,800 Analysis reveals the following additional data. 1.Prepaid insurance is the cost of a 4-year insurance policy, effective April 1. 2.Depreciation on the equipment is $400 per month. 3.The note payable is dated April 1. It is a 6-month, 10% note. 4.Eight customers paid for the company's 6-month lawn service package of $300 beginning in April. The company performed services for these customers in April. 5.Lawn services performed for other customers but not recorded at April 30 totaled $800. Instructions Prepare the adjusting entries for the month of April. Show computations.

Answer 1

*The adjusting entries ensure that the revenue recognition and expense recognition principles are followed.

	Adjusting ENTRIES
Date	Account title	Debit	Credit
1	Insurance Expenses	$         75
	Prepaid insurance		$         75
	(To record the adjusted entry to recognize the expenses) [$3,600/4*12]
2	Depreciation Expenses	$      400
	Accumulated Depreciation		$      400
	(To record the depreciation)
3	Interest Expense	$      900
	Interest Payable		$      900
	(To record the accrued interest for a month)[$18,000*10%*6/12]
4	Unearned Revenue	$      300
	Service Rendered		$      300
	(To record the recognization of service rendered)
5	Accounts Receivable	$      800
	Service Rendered		$      800
	(To record the service rendered, But not recoreded)

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