Question

Kalmers & Meehan, a taxation partnership, is preparing its 30 June 2011 financial statements, and seeks advice from PK & Slug, a firm of reputable accountants. What advice would PK & Slug offer in relation to accounting for each of the following situations? If a journal entry is required, what should it be? 1. Steph's Tennis World Ltd owes $70 000 for taxation advice throughout the year. The invoice was forwarded in May. Steph's Tennis World Ltd refuses to pay any part of the invoice, on the grounds that it is dissatisfied with the advice it received from Kalmers & Meehan, since the taxation partnership did not take a few risks' to reduce the company's tax bill. 2. When Kalmers & Meehan's client Ranch Vineyards Ltd suffered liquidity problems during the year, it agreed to pay Kalmers & Meehan in kind: 50 bottles of its best wines, normally retailing at $100 per bottle, but costing $5 per bottle to produce. Ranch Vineyards Ltd was invoiced on 15 May and has not yet delivered the wine. 3. Kalmers & Meehan spent $3000 on a paved walkway to their firm during May. The entrance was paved in May.

Answer 1

S No	Account Titles	Debit	Credit
1	Accounts receivable	70,000
	Taxation advice revenue		70,000
	Doubtful debts expense	70,000
	Accounts receivable		70,000
2	Accounts receivable	5000
	Taxation advice revenue		5000
	[50*100]
3	Land and buildings	3000
	Cash		3000