The geological consulting firm of Gilbert, Marsh, & Kester prepares adjusting en

Question

The geological consulting firm of Gilbert, Marsh, & Kester prepares adjusting entries on a monthly basis. Among the items requiring adjustment on December 31, year 2, are the following. 1. The company has outstanding a $56,000, 9 percent, 2-year note payable issued on July 1, year 1. Payment of the $56,000 note, plus all accrued interest for the 2-year loan period, is due in full on June 30, year 3 2. The firm is providing consulting services to Texas Oil Company at an agreed-upon rate of $930 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 $56,000 note payable plus all accrued interest are paid in full on June 30, year 3. What portion of the total interest expense associated with this note will be reported in the firm's year 3 income statement? c. Assume that on January 30, year 3, Gilbert, Marsh, & Kester recelve $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? Complete this question by entering your answers in the tabs below Required ARequired B Required C Assume that on January 30, year 3, 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? Required B

Explanation / Answer

Part (a )Journal Entries

Date

General Jpurnal

Debit

Credit

31-Dec

Interest Expense

$           420.00

           Interest Payable

$         420.00

(interest for 1 Month recorded)

31-Dec

Accounts receivables

$       9,300.00

            Accrued Consulting Revenue Earned

$     9,300.00

(Revenue earned but not billed)

Part b

Interest for 6 months will be recorded in year 3

Value of Loan

$     56,000.00

Interest rate

        9%

Interest for a year

$       5,040.00

Interest for 6 Months ($ 5040/2)

$       2,520.00

Interest to be Recorded in year 3

$       2,520.00

Part c

Total Revenue

$     25,000.00

Less: Revenue Earned in December

$       9,300.00

Revenue Earned in and Recorded in January

$     15,700.00

Part (a )Journal Entries

Date

General Jpurnal

Debit

Credit

31-Dec

Interest Expense

$           420.00

           Interest Payable

$         420.00

(interest for 1 Month recorded)

31-Dec

Accounts receivables

$       9,300.00

            Accrued Consulting Revenue Earned

$     9,300.00

(Revenue earned but not billed)

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