Cole Co.pays all salaried employees on a biweekly basis.Overtime pay, however, is paid in the next biweekly period.Cole accrues salaries expense only at its December 31 year end.Data relating to salaries earned in December 2010 are as follows: Last payroll was paid on Dec/26/2010, for the two-week period ended Dec/26/2010.Overtime pay earned in the two-week period ended Dec/26/2010 was $5,000.
Remaining work days in 2010 were December 29, 30, 31, on which days there was no overtime.
The recurring biweekly salaries total $80,000.Assuming a five-day work week, Cole should record a liability at December 31, 2010 for accrued salaries of
A)$24,000.
B)$29,000.
C)$48,000.
D)$53,000.

Question

Quizplus · Accepted Answer

Since the last payroll was paid on December 26th, the next payroll would be paid on January 9th (two weeks later). Therefore, the $5,000 overtime pay earned in the two-week period ended December 26th would be paid in the next period and should not be included in the accrued salaries liability.

The remaining work days in 2010 were December 29th, 30th, and 31st, which were regular work days with no overtime. Therefore, the accrued liability for those three days would be (3/5) x $80,000 = $48,000.

Adding this to the already paid $80,000, the total salaries expense for the year would be $128,000.

Cole CoPays All Salaried Employees on a Biweekly Basis