On December 31,2012,employees who earn $500 per day have worked eight days and will be paid on January 6,2013.The adjusting entry on December 31,2012,includes a debit to Salaries Expense for $4,000.

Question

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The adjusting entry of a debit to Salaries Expense for $4,000 indicates that the company has accrued for the eight days worked by employees who earn $500 per day. This is because the total amount earned by these employees for the eight days worked would be $4,000 ($500 x 8 days). By debiting Salaries Expense, the company recognizes the expense in the current period, even though the cash payment to employees will occur in the following period. Therefore, this statement is true.

On December 31,2012,employees Who Earn $500 Per Day Have Worked