Question

Sanborn Company has 10 employees, who earn a total of $1,900 in salaries each working day. They are paid on Monday for the five-day workweek ending on the previous Friday. Assume that year ended December 31, is a Wednesday and all employees will be paid salaries for five full days on the following Monday. The adjusting entry needed on December 31 is: 

 Debit Salarles Expense, $5,700, credit Salarles Payable, $5,700. 

 Debit Salarles Expense, $3,800, credit Salarles Payable, $3,800.

 Debit Salarles Expense, $9,500, credit Salarles Payable, $9,500.

 Debit Salarles Payable, $5,700; credit Salarles Expense, $5,700.

 Debit Salaries Expense, $5,700; credit Cash, $5,700.

Answer 1

Ist option – Debit salaries expense $5700 and Credit Salaries payable $5700 is the correct answer, the reason is as follows:

Salary of Monday, Tuesday and Wednesday comes in the current year which should be recognized as expense in the current year as per mercantile accounting system, but the same will be payable on next Monday (in next year), so 3 days salary will be shown as salary payable in the Current liabilities in the balance sheet.