The geological consulting firm of Gilbert, Marsh, & Kester prepares adjusting entries on a monthly basis. Among the items requiring adjustment on December 31, 2011, are the following:The company has outstanding a $50,000, 9 percent, two-year note payable issued on July 1, 2010. Payment of the $50,000 note, plus all accrued interest for the two-year loan period, is due in full on June 30, 2012.The firm is providing consulting services to Texas Oil Company at an agreed-upon rate of $1,000 per day. At December 31, 10 days of unbilled consulting services have been provided.Required:Prepare the two adjusting entries required on December 31 to record the accrued interest expense and the accrued consulting revenue earned.Assume that the $50,000 note payable plus all accrued interest are paid in full on June 30, 2012. What portion of the total interest expense associated with this note will be reported in the firm’s 2012 income statement?Assume that on January 30, 2012, Gilbert, Marsh, & Kester receive $25,000 from Texas Oil Company in full payment of the consulting services provided in December and January. What portion of this amount constitutes revenue earned in January?

Journal entry: Journal entry is the book of original entry where first transactions are recorded in…

Answered: outstanding a $50,000, 9 percent,…

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter4: Income Measurement And Accrual Accounting

Section: Chapter Questions

Problem 4.1P: Adjusting Entries Kretz Corporation prepares monthly financial statements and therefore adjusts its...

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The geological consulting firm of Gilbert, Marsh, & Kester prepares adjusting entries on a monthly basis. Among the items requiring adjustment on December 31, 2011, are the following:

The company has outstanding a $50,000, 9 percent, two-year note payable issued on July 1, 2010. Payment of the $50,000 note, plus all accrued interest for the two-year loan period, is due in full on June 30, 2012.
The firm is providing consulting services to Texas Oil Company at an agreed-upon rate of $1,000 per day. At December 31, 10 days of unbilled consulting services have been provided.

Required:

Prepare the two adjusting entries required on December 31 to record the accrued interest expense and the accrued consulting revenue earned.
Assume that the $50,000 note payable plus all accrued interest are paid in full on June 30, 2012. What portion of the total interest expense associated with this note will be reported in the firm’s 2012 income statement?
Assume that on January 30, 2012, Gilbert, Marsh, & Kester receive $25,000 from Texas Oil Company in full payment of the consulting services provided in December and January. What portion of this amount constitutes revenue earned in January?

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