Question

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 1

Step-by-Step Solution

Step 1: Definition of legal fees payable

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

Step 2: Entries related legal fees

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_

 

The cash account credited with $3,500