Question

Adjusting and paying accrued expenses LO P3

On April 1, the company hired an attorney for April for a flat fee of $3,500. Payment for April legal services was made by the company on May 12. As of April 30, $3,000 of interest expense has accrued on a note payable. The full interest payment of $9,000 on the note is due on May 20. 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.
A. What is the adjusting entry needed on April 30 for the interest expense?
B. What is the adjusting entry needed on April 30 for the accrued salaries?

Answer 1

The adjusting entry needed on April 30 for the interest expense is a debit of $3,000 to Interest Expense and a credit of $3,000 to Interest Payable. For accrued salaries, the entry is a debit of $4,000 to Salaries Expense and a credit of $4,000 to Salaries Payable.

Step-by-step explanation:

On April 30, to account for the accrued interest expense of $3,000, the adjusting entry will be to debit Interest Expense and credit Interest Payable. This entry recognizes the expense that has been incurred during the month even though the payment will not be made until May 20.

The journal entry would be:

Debit Interest Expense: $3,000

Credit Interest Payable: $3,000

For the accrued salaries, since the employees worked for two days since the last payday and the weekly salaries are $10,000 for five days, the daily salary is $2,000 ($10,000/5 days). Therefore, for two days, the total accrued salary is $4,000 ($2,000 x 2 days).

The journal entry would be:

Debit Salaries Expense: $4,000

Credit Salaries Payable: $4,000