On December 15, Great Designs Company hired an independent contractor for a project. The contractor completed the project on December 29 and submitted an invoice for $2,425 which was due on January 15 . The amount was duly paid on January 15. (a) Prepare the journal entry or entries necessary to record these transactions. (b) Explain why you prepared this/these journal entries
(a) Dec. 29 Professional ServicesExpense 2,425
Accounts Payable 2,425
Jan. 15 Accounts Payable 2,425
Cash 2,425
(b) The first journal entry is required to record the expense of the independent contractor in the period in which the services were received. This journal entry created an expense in December's income statement and a liability on December's balance sheet. The second entry was to pay the contractor when the payment was due. This removed the liability by resolving it with a cash payment. This journal entry did not affect January's income statement.
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