Employees at Julian Corporation are paid $15,000 cash every Friday for working Monday through Friday. The calendar year accounting period ends on Wednesday, December 31. How much salary expense should be recorded two days later on January 2?

Question

Quizplus · Accepted Answer

Employees are paid for Monday through Friday, so they have earned 4/5 of their salary for the week by December 31 (the end of the accounting period). Therefore, the salary expense to be accrued on December 31 is calculated as follows:

$15,000 x 4/5 = $12,000

Since the payment on January 2 represents payment for work performed in the new accounting period, no salary expense needs to be recorded for it. Thus, the amount of salary expense to be recorded on January 2 is the difference between the amount accrued on December 31 ($12,000) and the amount paid on January 2 ($6,000):

$12,000 - $6,000 = $6,000

Employees at Julian Corporation Are Paid $15,000 Cash Every Friday