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Q2E_a

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Financial & Managerial Accounting
Found in: Page 145
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Question: The following three separate situations require adjusting journal entries to prepare financial statements as

of April 30. For each situation, present both:

∙ The April 30 adjusting entry.

∙ The subsequent entry during May to record payment of the accrued expenses.

Entries can draw from the following partial chart of accounts: Cash; Accounts Receivable; Prepaid

Interest; Salaries Payable; Interest Payable; Legal Services Payable; Unearned Revenue; Revenue; Salaries

Expense; Interest Expense; Legal Services Expense; Depreciation Expense.

a. On April 1, the company retained an attorney for a flat monthly fee of $3,500. Payment for April legal

services was made by the company on May 12.

b. A $900,000 note payable requires 12% annual interest, or $9,000, to be paid at the 20th day of each

month. The interest was last paid on April 20, and the next payment is due on May 20. As of April 30,

$3,000 of interest expense has accrued.

c. Total weekly salaries expense for all employees is $10,000. This amount is paid at the end of the day

on Friday of each five-day workweek. April 30 falls on a Tuesday, which means that the employees

had worked two days since the last payday. The next payday is May 3.

Legal fess expenses debited ans legal fees payable is credited with $3,500. Legal fees payable is debited and cash account credited with $3,500

See the step by step solution

Step by Step Solution

Step-by-Step SolutionStep 1: Definition of legal fees payable

The legal fees are due, but the payment is not made.

Step 2: Entries related legal fees

Journal entry

Date

Particulars

Debit

Credit

April 30

Legal Fees Expense

$3,500

Legal Fees Payable

$3,500

(Adjusting entry for legal fees)

May 12

Legal Fees Payable

$3,500

Cash

$3,500

(Entry for the payment of legal fees_

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