Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Below are selected transactions of Lemonade Ltd, a public company, for 2020: 1. On January 1, 2020, the company sold $250,000 of products, all of

Below are selected transactions of Lemonade Ltd, a public company, for 2020: 

1. On January 1, 2020, the company sold $250,000 of products, all of which carried a two-year warranty (included in the price). If the two-year warranty was sold separately, it was estimated that 6% of the selling price represented the warranty portion. Actual warranty costs were $2,100 in Year 4. 60% of the revenue would be earned in the first year and the balance being recognized in the second year. The company uses service-type warranty (revenue-based). 

2. On May 10, the company purchased goods from Jack Corp. for $30,000, terms 2/15, net 30. Lemonade uses the periodic inventory system. The invoice was paid on May 22. 

3. On June 1, the company purchased equipment for $90,000 from Songbird Ltd., paying $30,000 in cash and issuing a one-year, 7% note for the balance. 

4. On October 1, the company borrowed money from the Teekay Bank by signing a one year, zero-interest-bearing note for $90,000. The market rate for a similar note is 7%. 

5. On November 1, Lemonade purchased new furniture for $20,000 on account. The furniture has a useful life of 10 years and the company uses straight-line depreciation. 

Required: 

(a) Prepare the journal entries necessary to record the transactions above using appropriate dates.  

(b) Prepare the adjusting entries necessary at year end, December 31, Year 4 related to the above transactions. Round to the nearest dollar.

Step by Step Solution

3.53 Rating (156 Votes )

There are 3 Steps involved in it

Step: 1

Tournal Entries in Lemonade led Particular Gudst Amount Date 112020 ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Cornerstones of Financial Accounting

Authors: Jay Rich, Jeff Jones

4th edition

978-1337690881, 9781337669450, 1337690880, 1337690899, 1337669458, 978-1337690898

More Books

Students also viewed these Accounting questions