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 $1,080,000 note payable requires 10% 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 tuesday of this year, which means that the employees had worked two days since the last payday. the next payday is may 3.

Question

Mckinley Reed

Business

30 October, 02:18

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 $1,080,000 note payable requires 10% 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 tuesday of this year, which means that the employees had worked two days since the last payday. the next payday is may 3.

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Answers (1)

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Damien Munoz · Answer 1

Assuming you are asked to enter the journal Entries:

A) The company records the accrued legal expense on April 30:

Debit: Legal Expense $3500

Credit: Legal Expense Payable ($3500)

On May 12, the company has settled its payable by paying the bill:

Debit: Legal Expense Payable: $3500

Credit: Cash $ (3500)

B) The payment on April 20th is a increasing (debit) of interest expense and a decreasing (credit) of cash.

Debit: Interest Expense: 9,000

Credit: Cash (9,000)

On April 30, we recognize the interest accrued as of that date, by increasing interest expense and interest payable

Debit: Interest Expense: $3,000

Credit: Interest Payable: ($3,000)

C) If we are preparing a month-end statement, then we must recognize the accrued salary expense and related payable up until the end of April (Tuesday, April 30). We have accrued 2/5 of the 10,000 weekly salary payable. This amount is 4,000.

Entry on April 30:

Debit: Salaries and Wages Expense: $4,000

Credit: Salaries and Wages Payable: ($4,000)

Entry on May 3rd (to record the rest of the week’s salary expense and the payment of salaries, and also the settlement of the salaries payable recorded on April 30. Note that we have already recognized the other $4,000 of the salaries expense on April 30)

Debit: Salaries and Wages Expense: $6,000

Debit: Salaries and Wages Payable: $4,000

Credit: Cash ($10,000)