Answer:
1. Debit Salaries expense $7,500
Credit Accrued Salaries $7,500
2. Balance in Accrued salaries is $7,500
Balance in Salaries expense is $627,500
3. Debit Salaries expense $5,000
Debit Accrued Salaries $7,500
Credit Cash $12,500
Being entries to recognize the payment of salaries
Explanation:
When an expense is incurred but yet to be paid, it is recognized with a corresponding entry posted into an accrued expense account (this shows the entity has a liability).
If the weekly payroll expense is $12,500 then the daily rate is
= $12,500/5 (for 5 work day week)
= $2,500
If December 31 falls on a Wednesday, it means that an expense (payroll) has been incurred for 3 days. This expense amounts to
= 3 * $2,500
= $7,500
This will be recognized as a debit to Salaries expense and a credit to accrued expense.
The balance in Salaries expense will be
= $620,000 + $7,500
= $627,500
The remaining expense that will be further incurred at the end of the week
= $12,500 - $7,500
= $5,000
When payment is made, the liability is cleared
