Buster Industries pays weekly salaries of $30,000 on Friday for a five-day week ending on that day. The adjusting entry necessary at the end of the fiscal period ending on Tuesday is
A) debit Salaries Payable, $12,000; credit Cash, $12,000
B) debit Salary Expense, $12,000; credit Dividends, $12,000
C) debit Salary Expense, $12,000; credit Salaries Payable, $12,000
D) debit Dividends, $12,000; credit Cash, $12,000

Question

Quizplus · Accepted Answer

Since the weekly salaries are paid on Fridays, the adjusting entry is necessary as the fiscal period ends on Tuesday. This means that two days of salaries are still unpaid, and therefore should be accrued as a liability.

The adjusting entry to properly account for the accrued salaries is to debit the Salary Expense account for the unpaid salaries and credit the Salaries Payable account for the same amount.

Therefore, the correct answer is option C - debit Salary Expense, $12,000; credit Salaries Payable, $12,000.

Buster Industries Pays Weekly Salaries of $30,000 on Friday for a Five-Day