Question

1. X corp is closing its books for year and asks the law firm for the amount they should accrue for their legal work performed for the year that won’t be billed until next year. The law firm estimates $100,000 of 2019 legal fees that will be billed after year-end. X corp accrues the full $100,000 in December.

In January, the law firm bills x corp  60,000 for 2019 legal work and indicates that the remaining $40,000 will be billed in February 2020. In February, the law firm issues a final bill for 2019 legal work that comes in at $32,000.

Show the dec, jan, and feb entries

2. On 8/1, ABC bank asks X corp. to conduct a 3 week research project for a new credit card the bank is planning on issuing. X corp proposes a fee of $514,540 for the project which the bank accepts. On 9/2, ABC bank issues a check to X corp for $514,450, accidentally short paying the invoice by $90. X corp decides to write-off the short payment. Show how X corp. should record all the transactions relating to this project.

3. X corp buys a $100,000 certificate of deposit (CD) through its bank using excess cash in its operating account on 3/1. The CD matures in 90 days and pays interest upon maturity of $750. Show the entries to record these transactions.

Answer 1

Answering to Q 1
Dec 2019	Legal Fees a/c	$100,000
	To Provision a/c		$100,000
Jan 2020	Provision a/c	$60,000
	To Vendor a/c		$60,000
Feb 2020	Provision a/c	$32,000
	To Vendor a/c		$32,000
Feb 2020	Provision a/c	$8,000
	To Retained Earnings a/c		$8,000
(Any adjustment to previous year provisions should be done of opening P&L a/c (Retained Earnings)
Answering to Q 2
8/21	Accounts Receivable a/c	$514,540
	To Revenue a/c		$514,540
(Revenue can be recognized only after service is rendered)
9/2	Bank a/c	$514,450
	To Accounts Receivable a/c		$514,450
9/2	Bad debts a/c	$90
	To Accounts Receivable a/c		$90
Answering to Q 3
3/1	Certificate of Deposits a/c	$100,000
	To Bank a/c		$100,000
6/1	Bank a/c	$100,750
	Interest Income a/c		$750
	Certificate of Deposits a/c		$100,000