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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.

Answer:

Salary expenses debited and salary payable credited with $4,000. For payment of salary, salary expense debited by $6,000, salaries payable debited by $4,000 and cash credited with $10,000.

See the step by step solution

Step by Step Solution

Step-by-Step SolutionStep 1: Definition of salaries payable

The interestis due, but the payment is not made.

Step 2: Entries related salaries payable

Journal entry

Date

Particulars

Debit

Credit

April 30

Salaries Expense

$4,000

Salaries Payable

$4,000

(Adjustment entry of salaries payable)

May 3

Salaries Expense

$6,000

Salaries Payable

$4,000

Cash

$10,000

(Payment of salary)

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