Question

Total payroll expense last year was $120,000.  During the current year, all employees received a 2% raise, nobody left and one new person started on July 1 for a monthly salary of $2,000.  Payroll is paid on the 1st day of each month for services provided during the previous month.  Assume all months pay are the same regardless of the number of days in the month.  Perform an analytic to develop an expectation of what you think accrued payroll should be as of the end of the year.

Answer 1

Total payroll expenses for last year (for services of January to December ) = $ 120,000

Accrued payroll expense for current year ( for services between January to December) = $134,400

• Current year accrued payroll ={( $120,000 + 2%) + ( $ 2,000 × 6 months ) }
• 122,400 + 12,000 = $ 134,400

Accrued payroll for this year includes the raise of 2% and ($ 2,000 ×6) The salary of new employee who worked only for 6 months , July to December

So the accrued payroll for current year is $ 134,400