Question

Journalizing and posting an adjusting entry for accrued salaries expense

Answer 1

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