Question

The employees of Neat Clothes work Monday through Friday. Every other Friday the company issues payroll checks totaling $26,000. The current pay period ends on Friday, July 3. Neat Clothes is now preparing quarterly financial statements for the three months ended June 30. What is the adjusting entry to record accrued salaries at the end of June?

Multiple Choice

• Salaries expense	5,200
  Salaries payable		5,200

• Prepaid salaries	7,800
  Salaries payable		7,800

• Salaries expense	18,200
  Prepaid salaries	7,800
  Salaries payable		26,000

• Salaries expense	18,200
  Salaries payable		18,200

Answer 1

Since is to be paid on July 3, Hence on June 30, salary is outstanding for 7 days

Salary expense for a two week period (10 days) = $26,000

Hence salary expense for 7 days = 26,000 x 7/10

= $18,200

Hence, the following adjusting entry will be made on June 30 for salary expense :

Salaries expense	18,200
Salaries payable		18,200

Fourth option is the Correct option.