Ostroff, Fair and Company
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Adjusting entries. acrrual basis?


a company has 15 employees who earn a total of 1960 in salaries each working day. they are paid on each monday for their work in the previous 5 days workweek ending on the previous friday. assume that the 31 december, 2006 is a tuesday and all 15 employees worked the first two days of the week. they will be paid a full five days salaries on monday january 6, 2007. because new year is a paid holiday.


prepare a journal entrie to record the first subsequent cash transaction in 2007.

Actually I am getting my bachelors in accounting and we had had a long class on this:

12/31/06 adjusting entries should be:
(Debit) Salaries Expense 3920
(Credit) Salaries Payable 3920

Then you actually will have two options... you can begin the new year off with a credit balance in S. Payable or on Jan. 1 (or 2nd) you can do a reversing entry of
(Debit) Salaries Payable 3920
(Credit) Salaries Expense 3920

And depending on which method you are using this is what your Jan. 6, 2007 entries would be:
Did NOT reverse:5880
(Debit) Salaries Expense 5880
(Debit) Salaries Paybable 3920
(Credit) Cash 9800

1/6/07 AFTER REVERSING ENTRY HAS BEEN DONE
(Debit) Salaries Expense 9800
(Credit) Cash 9800

It is more of a matter of which ever method you prefer but when you are accruing the reversing entry tends to be used more ofter.
dec 31 adjusting entry- accrual of the 1 day (dec31) salary expense

debit salary expense 1960
credit salaries payable 1960

(plus usual reversing entries to close books that will leave the salaries payable 1960 outstanding)

on jan 6 payment of salaries

debit salaries payable 1960
debit salaries expense 7840
credit cash 9800
Sheila's answer is correct except that the December entry should be for two days not 1, and the January entry is for three days, not four.
LOL Trying to get us to do your homework for you eh?

I suggest reading your text book and not trusting yahoo peeps for the information.
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