Laramie Company signed a contract with a service provider for security services at a rate of $350 per month for the period of January through June.Laramie Company will pay the service provider the entire amount at the end of June.Laramie Company makes adjusting entries each month.During the month of June,it should record total security expense of $700.

Question

Quizplus · Accepted Answer

The total security expense for the month of June should only be recorded as $350 since the contract states that the payment will be made at the end of June and the expense should be recognized in the same period in which it is incurred. Therefore, the adjusting entry for June should be to debit Security Expense for $350 and credit Accrued Security Payable for $350.

Laramie Company Signed a Contract with a Service Provider for Security