The geological consulting firm of Gilbert, Marsh, & Kester prepares adjusting entries on a monthlybasis. Among the items requiring adjustment on December 31, 2011, are the following:1. 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, isdue in full on June 30, 2012.2. 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.a. Prepare the two adjusting entries required on December 31 to record the accrued interestexpense and the accrued consulting revenue earned.b. 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 inthe firm’s 2012 income statement?c. Assume that on January 30, 2012, Gilbert, Marsh, & Kester receive $25,000 from Texas OilCompany in full payment of the consulting services provided in December and January. Whatportion of this amount constitutes revenue earned in January?
The geological consulting firm of Gilbert, Marsh, & Kester prepares
basis. Among the items requiring adjustment on December 31, 2011, are the following:
1. 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.
2. 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.
a. Prepare the two adjusting entries required on December 31 to record the accrued interest
expense and the accrued consulting revenue earned.
b. 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?
c. 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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