Question

Pharoah Corporation provides its officers with bonuses based on net income. For 2017, the bonuses total $384,900 and are paid on February 15, 2018. Prepare Pharoah’s December 31, 2017, adjusting entry and the February 15, 2018, entry. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Answer 1

Answer: Pharaohs journal $

Date

December 31, 2017

StaffBonusexpensesDr384,900

Accruede liability Cr384,900

Narration. Staff bonus due as at date.

February 15,2018

Accrued liability Dr 384, 900

Bank Cr. 384,900

Narration. Payment of staff bonus due

Explanation:

In line with the acrual concept of recognising expenses at the period they are due for payment. The staff bonus will be recognized as an expense to the income statement in 2017 and accrued as liability in the balance sheet if it's not paid.

The payment in 2018 will be a debit to the liability account and credit to the cash or bank account.