Question

Question 2B

Zheng Corporation had the following selected transactions in the month of March. The company adjusts its accounts monthly.

1.		The company has a 10%, $12,840 bank loan payable due in one year. Interest is payable on the first day of each following month and was last paid on March 1.
2.		At the end of March, the company earned $250 interest on its investments. The bank deposited this amount in Zheng’s cash account on April 1.
3.		Zheng has five employees who each earn $400 a day. Salaries are normally paid on Mondays for work completed Monday through Friday of the previous week. Salaries were last paid on Monday, March 26. March 31 falls on a Saturday this year. Salaries will be paid next on Monday, April 2.
4.		At the end of March, the company owed the utility company $570 and the telephone company $350 for services received during the month. These bills were paid on April 10. (Hint: Use the Utilities Expense account for the utility and telephone services.)
5.		At the end of March, Zheng has earned a service revenue of $3,600 that it has not yet billed. It bills its clients for this amount on April 4. On April 30, it collects $2,400 of this amount due.

For each of the above situations, prepare the journal entry to record the subsequent cash transaction in April. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round all amounts to the nearest dollar. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

No.	Date	Account Titles and Explanation	Debit	Credit
1.	Apr. 1
2.	Apr. 1
3.	Apr. 2
4.	Apr. 10
5.	Apr. 4
6.	Apr. 30

Answer 1

No.	Date	Account Titles and Explanation	Debit	Credit
1.	Apr. 1	Interest payable	$107
		Cash		$107
		( To record cash payment for interest)
2.	Apr. 1	Cash	$250
		Interest receivable		$250
		( To record cash receipt of interest)
3.	Apr. 2	Salaries payable	$10,000
		Cash		$10,000
		( To record cash payment of salary expense)
4.	Apr. 10	Utilities expense	$920
		Cash		$920
		( To record cash payment of utilities expense)
5.	Apr. 4	Accounts receivable	$2,400
		Service revenue		$2,400
		( To record service revenue)
6.	Apr. 30	Cash	$2,400
		Accounts receivable		$2,400
		( To record cash collected from customer)

Interest payable on April  1 = Loan x Interest rate x time period

= 12,840 x 10% x 1/12

= $107

Salaries payable on April 2 = Number of Employees x Salary expense per employee per day x Number of days

= 5 x 400 x 5

= $10,000

Utilities payable on April 10 = Utility bill + Telephone bill

= 570+350

= $920

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