Major Ltd has a weekly payroll of $30,000. Its employees work a 5-day week (Monday to Friday) and are paid on Thursdays in arrears (i.e., for the five days up to, and including, the Thursday). Pay-as-you-go tax on the weekly payroll is $10,000 and this is paid to the Australian Tax Office on the following Monday. Deductions of $1,000 are also made on behalf of employees to pay into a medical benefits fund. The year ended 30 June 2004 falls on a Wednesday. What is the accounting entry to record accrued salaries and wages for this period?
E) None of the given answers.

Question

Quizplus · Accepted Answer

Accrued salaries and wages for the period would be recorded as follows:

Salaries and wages expense (5/7 x $30,000) $21,429
Payable to employees $21,429
Accrued tax payable $10,000
Accrued medical benefits payable $1,000

Option A is incorrect because it only records the accrued salary expenses and does not account for the tax and medical benefits payable. Option C and D are incorrect because they do not separate the tax and medical benefits payable from the salaries and wages payable. Option E is incorrect because there is a clear accounting entry required for this transaction.

Major Ltd Has a Weekly Payroll of $30,000