Mac Ltd provides legal advice to customers for fees On 30 June 2020, Mac Ltd completed its first year of operations Some of the ledger account balances of the business, before any financial year end (30 June) adjustments, are provided below $ Fees Revenue 442,500 Rent Expense 21,960 Electricity Expense 8,460 Wages Expense 163,200 Advertising Prepaid 2,700 No adjusting entries have been made to these accounts at any time during the year An analysis of the business records reveals the following The total Fees Revenue recorded includes $2,250 that was prepaid by a client as a deposit for legal advice to be provided in July 2020 The balance in Advertising Prepaid represents the amount paid for an advertising on a legal magazine for 6 months The agreement with the publisher of the magazine covers the period 1 May 2020 to 31 October 2020 The Electricity Expense ledger balance does not include the amount for June 2020 The account amounted to $1,575 and was received and paid during July The firms lease agreement for the office premises commenced from 1 July 2019 The agreement indicates a rent of $1,220 per month is to be paid on the first day of each month In addition, an annual amount equal to 0 2 of the entitys total fees revenue earned each year should be paid This extra rental is payable within 15 days of the end of the reporting period The entity hired part time employees Wages are paid fortnightly on Fridays (5 working day each week and each pay period covers Monday from preceding week to Friday in the pay week) In 2020, 30 June falls on a Tuesday and the wages for the two week pay period ended on Friday 3 July 2020 is $11,700 All employees worked the normal office hours during the two week pay period Required Journalise the necessary adjusting entries at the end of the period (6 marks) Apply the knowledge that you have learned from Lecture 4, using an example to explain the differences between cash basis and accrual basis accounting, and further discuss why adjusting entries are necessary (4 marks)

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Mac Ltd. provides legal advice to customers for fees. On 30 June 2020, Mac Ltd. completed its first year of operations. Some of the ledger

Mac Ltd. provides legal advice to customers for fees. On 30 June 2020, Mac Ltd. completed its first year of operations. Some of the ledger account balances of the business, before any financial year end (30 June) adjustments, are provided below:

	$
Fees Revenue	442,500
Rent Expense	21,960
Electricity Expense	8,460
Wages Expense	163,200
Advertising Prepaid	2,700

No adjusting entries have been made to these accounts at any time during the year. An analysis of the business records reveals the following.

The total Fees Revenue recorded includes $2,250 that was prepaid by a client as a deposit for legal advice to be provided in July 2020.
The balance in Advertising Prepaid represents the amount paid for an advertising on a legal magazine for 6 months. The agreement with the publisher of the magazine covers the period 1 May 2020 to 31 October 2020.
The Electricity Expense ledger balance does not include the amount for June 2020. The account amounted to $1,575 and was received and paid during July.
The firms lease agreement for the office premises commenced from 1 July 2019. The agreement indicates a rent of $1,220 per month is to be paid on the first day of each month. In addition, an annual amount equal to 0.2% of the entitys total fees revenue earned each year should be paid. This extra rental is payable within 15 days of the end of the reporting period.
The entity hired part-time employees. Wages are paid fortnightly on Fridays (5 working day each week and each pay period covers Monday from preceding week to Friday in the pay week). In 2020, 30 June falls on a Tuesday and the wages for the two-week pay period ended on Friday 3 July 2020 is $11,700. All employees worked the normal office hours during the two--week pay period.

Required:

Journalise the necessary adjusting entries at the end of the period. (6 marks)

Apply the knowledge that you have learned from Lecture 4, using an example to explain the differences between cash basis and accrual basis accounting, and further discuss why adjusting entries are necessary. (4 marks)