Chase 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 on December 31,which 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

Since the year ended on December 31st and the employees are paid on the following Monday for the previous week, there are two days of salaries (Thursday and Friday) that need to be accrued for. Therefore, the adjusting entry on December 31st should debit Salaries Expense for $5,400 (10 employees x 2 days x $270 daily salary) and credit Salaries Payable for $5,400 to reflect the unpaid salaries as of December 31st. Choice A is the only option that reflects this.

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