Question

A company has Salaries Expense of $2,000 per day and has five working days each week, Monday through Friday. The company pays its employees on Friday for the days worked that week. June 30 falls on a Wednesday. When the company pays its employees on Friday, July 2^nd, the journal entry will include which of the following?

Question 38 options:

	Debit to Salaries Expense for $6,000
	Debit to Cash for $10,000
	Debit to Salaries Payable for $6,000
	Debit to Salaries Expense for $10,000
	Credit to Salaries Payable for $4,000

Answer 1

Since the payment will be made on Friday, the Company would need to accrue expenses related to 3 days from Monday to Wednesday. This would amount to

$2,000 X 3 days = $6,000

This amount will not be paid until Friday which would fall on July 2nd.

Hence on Jun 30, we would have

Debit Salaries Expense for $6,000 (this would account for the expense in the income statement)

Credit Salaries Payable for $6,000

On July 2nd, we would pay the expenses:

Salary Expense Debit - $4,000

Salaries Payable Debit - $6,000

Credit Cash for $10,000