Question

Sanborn Company has 10 employees, who earn a total of $2,300 in salaries each working day. They are paid on Monday for the five-day workweek ending on the previous Friday. Assume that year ended December 31, is a Wednesday and all employees will be paid salaries for five full days on the following Monday. The adjusting entry needed on December 31 is:

Answer 1

Answer:

December 31   Salaries Expense    $6900 Dr

                           Salaries Payable      $6900 Cr

Explanation:

On Wednesday December 31, 3 days salary has been accrued for this week - Monday, Tuesday and Wednesday.

The salary for three days is 2300 * 3 = $6900

This salary will be paid on the coming Monday thus they are a liability as they have been earned by the employess and are not yet paid. Thus Salaries payable will be credited by $6900 and Salaries expense will be debited by $6900.