A business pays weekly salaries of $25,000 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, $10,000; credit Cash, $10,000
B) debit Salary Expense, $10,000; credit Dividends, $10,000
C) debit Salary Expense, $10,000; credit Salaries Payable, $10,000
D) debit Dividends, $10,000; credit Cash, $10,000

Question

Quizplus · Accepted Answer

Since the business pays salaries weekly ending on Friday and the fiscal period ends on Tuesday, there are two days of salaries that have been earned but not yet paid. Therefore, the adjusting entry necessary is to debit Salary Expense (to recognize the expense) and credit Salaries Payable (to record the liability for the two days of salaries earned but not yet paid). The amount of this entry is $10,000, which represents 2/5 of the weekly salary cost ($25,000/5 days * 2 days). Therefore, the correct answer is C, debit Salary Expense, $10,000; credit Salaries Payable, $10,000.

A Business Pays Weekly Salaries of $25,000 on Friday for a Five-Day