Marwan Sarieddine

ID:201501935
Ex: 4.5

a. Prepare the two adjusting entries required on December 31 to record the accrued
interest expense and the accrued consulting revenue earned.
Dr Interest expense $375 ($50,000 x 9% x 1/12)
Cr Interest payable $375

Dr Accrued consulting revenue $10,000

Cr Consulting revenue $10,000 (10 days x $1,000)

b. Assume that the $50,000 note payable plus all accrued interest are paid in full on
June 30, 2008. What portion of the total interest expense associated with this note will
be reported in the firm's 2008 income statement?
By June 30, 2008, 6 months of interest would be reported in the 2008 income
statement, at $375 per month, so that makes the answer $2,250.

c. Assume that on January 30, 2008, 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?
If $25,000 were received on Jan 30, 2008, $10,000 belonged to 2007, so that makes
$15,000 the revenue earned in January.