Flagg, Inc. records adjusting entries at its December 31 year end. At December 31, employees had earned $12,000 of unpaid and unrecorded salaries. The next payday is January 3, at which time $30,000 will be paid. Prepare the January 1 journal entry to reverse the effect of the December 31 salary expense accrual.
A)Debit Salaries expense $12,000; credit Salaries payable $12,000.
B)Debit Salaries expense $18,000; debit Salaries payable $12,000; credit Cash $30,000.
C)Debit Salaries payable $18,000; credit Cash $18,000.
D)Debit Salaries payable $12,000, credit Salaries expense $12,000.
E)Debit Salaries expense $18,000; credit Salaries payable $18,000.

Question

Quizplus · Accepted Answer

To reverse the effect of the December 31 salary expense accrual, we need to debit Salaries payable (liability) to reduce the liability and credit Salaries expense (expense) to reduce the expense. Therefore, the correct entry is to debit Salaries payable for $12,000 and credit Salaries expense for $12,000.