Chapter 3: Q2E_a (page 145)
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.
Short Answer
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
Step by step solution
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