Question

Accrued Expense A business's lawyer charges $60 per hour to meet with the board of directors. The business pays for the expense on the fifth of every month. By the end of the year, the board members and lawyer had met 51 hours since the last pay period. a. How much should the business record as an accrued legal expense at year-end? b. Record the journal entry to make the adjustment

Answer 1

a. The business should record $3,060 as an accrued legal expense at year-end. b. The journal entry to make the adjustment would be a debit to Legal Expenses and a credit to Accrued Legal Expense.

Step-by-step explanation:

a. To calculate the accrued legal expense at year-end, you need to determine the number of hours worked since the last pay period and multiply it by the lawyer's hourly rate. In this case, the board members and lawyer had met for 51 hours since the last pay period and the lawyer charges $60 per hour. So, the accrued legal expense at year-end would be 51 hours x $60 = $3,060.

b. To record the journal entry for the adjustment, you would debit the expense account (Legal Expenses) by $3,060 and credit the accrued liability account (Accrued Legal Expense) by $3,060.