A business pays weekly salaries of $20,000 on Friday for a five-day week ending on that day. The adjusting entry necessary at the end of the fiscal period ending on Tuesday is
A) debit Salaries Payable, $8,000; credit Cash, $8,000
B) debit Salary Expense, $8,000; credit Dividends, $8,000
C) debit Salary Expense, $8,000; credit Salaries Payable, $8,000
D) debit Dividends, $8,000; credit Cash, $8,000

Question

Quizplus · Accepted Answer

The adjusting entry necessary at the end of the fiscal period ending on Tuesday is to recognize the portion of the weekly salaries that have been earned but not paid. As the week only includes Tuesday, there are two days of salaries earned but not paid (Wednesday and Thursday).

The adjusting entry should be a debit to Salary Expense for $8,000 (2/5 of $20,000) and a credit to Salaries Payable for $8,000. This recognizes the expense and the liability for the unpaid portion of the salaries. Therefore, the correct choice is C.

A Business Pays Weekly Salaries of $20,000 on Friday for a Five-Day