A business pays biweekly salaries of $20,000 every other Friday for a ten-day period ending on that day.The adjusting entry necessary at the end of the fiscal period ending on the second Wednesday of the pay period includes a
A)debit to salary expense of $8,000
B)debit to salaries payable of $8,000
C)credit to salary expense of $16,000
D)credit to salaries payable of $16,000

Question

Quizplus · Accepted Answer

Since the bi-weekly salaries are paid on every other Friday for a ten-day period ending on that day, the pay period ends on the second Wednesday of the pay period. This means that there are two days of salaries (Thursday and Friday) that have been earned, but not yet paid for at the end of the fiscal period.

To account for this, an adjusting entry is needed to record the amount of these two days of salaries that have been earned but not yet paid for. Since the salaries have been earned, but not yet paid, this is a liability to the company and is recorded as salaries payable.

Therefore, the adjusting entry necessary at the end of the fiscal period ending on the second Wednesday of the pay period includes a debit to salaries payable of $16,000 (two days of salaries for all employees) and a credit to salary expense, which has already been recorded for the full bi-weekly salary amount.

Thus, the correct choice is option D, which states a credit to salaries payable of $16,000.

A Business Pays Biweekly Salaries of $20,000 Every Other Friday