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Journalizing and posting an adjusting entry for accrued salaries expense

Birch Park Senior Center has a weekly payroll of $12,500. December 31 falls on Wednesday, and Birch Park Senior Center will pay its employees the following Monday (January 5) for the previous full week. Assume Birch Park Senior Center has a five-day workweek and has an unadjusted balance in Salaries Expense of $620,000.

Requirements

1. Record the adjusting entry for accrued salaries on December 31.

2. Post the adjusting entry to the accounts involved, and show their balances after adjustments.

3. Record the journal entry for payment of salaries made on January 5.

Respuesta :

Answer:

1. Debit Salaries expense  $7,500

  Credit Accrued Salaries  $7,500

2. Balance in Accrued salaries is $7,500

Balance in Salaries expense is $627,500

3. Debit Salaries expense $5,000

   Debit Accrued Salaries  $7,500

   Credit Cash  $12,500

    Being entries to recognize the payment of salaries

Explanation:

When an expense is incurred but yet to be paid, it is recognized with a corresponding entry posted into an accrued expense account (this shows the entity has a liability).

If the weekly payroll expense is $12,500 then the daily rate is

= $12,500/5 (for 5 work day week)

= $2,500

If December 31 falls on a Wednesday, it means that an expense (payroll) has been incurred for 3 days. This expense amounts to

= 3 * $2,500

= $7,500

This will be recognized as a debit to Salaries expense and a credit to accrued expense.

The balance in Salaries expense will be

= $620,000 + $7,500

= $627,500

The  remaining expense that will be further incurred at the end of the week

= $12,500 - $7,500

= $5,000

When payment is made, the liability is cleared

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