Sanborn Company has 10 employees,who earn a total of $1,800 in salaries each working day.They are paid on Monday for the five-day workweek ending on the previous Friday.Assume that year ended December 31,is a Wednesday and all employees will be paid salaries for five full days on the following Monday.The adjusting entry needed on December 31 is:
A)Debit Salaries Expense,$5,400;credit Salaries Payable,$5,400.
B)Debit Salaries Expense,$3,600;credit Salaries Payable,$3,600.
C)Debit Salaries Expense,$9,000;credit Salaries Payable,$9,000.
D)Debit Salaries Payable,$5,400;credit Salaries Expense,$5,400.
E)Debit Salaries Expense,$5,400;credit Cash,$5,400.

Question

Quizplus · Accepted Answer

The adjusting entry needed on December 31 is to recognize the salary expense for the last week of December. Since the year ended on a Wednesday, the employees will work three days (December 29-31) in the last week of December and will be paid for five full days on the following Monday. Therefore, their total salary for the week will be 10 employees x $180 per day x 5 days = $9,000, but only $1,800 (10 employees x $180 per day) of this amount is included in the salary expense for the year ended December 31. The remaining $7,200 is a liability as of December 31 and should be recorded as a credit to Salaries Payable. The corresponding debit entry should be made to Salaries Expense for $1,800 (the amount earned by the employees during the year ended December 31). Therefore, the adjusting entry on December 31 should be:

Debit Salaries Expense $1,800
Credit Salaries Payable $7,200

Sanborn Company Has 10 Employees,who Earn a Total of $1,800