A business pays weekly salaries of $20,000 on Friday for a five-day week ending on that day. The adjusting entry necessary at the end of the fiscal period ending on Thursday is:
debit Salaries Payable, $16,000; credit Cash, $16,000
debit Salary Expense, $16,000; credit Drawing, $16,000
debit Salary Expense, $16,000; credit Salaries Payable, $16,000
debit Drawing, $16,000; credit Cash, $16,000
Now i am only seeing if i am getting this right
I am thinking the answer is:
debit Salary Expense, $16,000; credit Salaries Payable, $16,000
You are correct! The adjusting entry necessary at the end of the fiscal period ending on Thursday would be to debit Salary Expense for $16,000 and credit Salaries Payable for $16,000.
Here's an explanation of why this is the correct entry:
- The weekly salaries paid on Friday actually cover the workweek from Monday to Friday. So, for the fiscal period ending on Thursday, the business would have incurred salary expense only for Monday to Thursday (4 days out of the 5-day workweek).
- The Salary Expense account should be debited for the actual salary expense incurred for the 4 days, which is $16,000.
- To reflect the liability of the remaining 1 day's salary, Salaries Payable should be credited for $16,000. This means that the business owes this amount to the employees for the remaining day of the workweek.
By recording this adjusting entry, the Salary Expense account will reflect the actual expense incurred for the fiscal period, and Salaries Payable will reflect the remaining liability.