Question

viii. During the last few days in December, Dire Dewar employees earned Br.25,000, which will be paid at the end of the pay period in early January 2014. Also, Dire Dewar received a utility bill for Br.4,000 for December 2013, which will be paid in January 2014.Use the preceding information to do the following:a. Prepare journal entries to record the foregoing transactions and events. ( 3 Pts.

Answer 1

Explanation:

Based on the information given, the following journal entries can be prepared:

To record the earnings of employees:

Date: December 31, 2013

Accounts Debit/Credit:

Salary Expense Dr. Br.25,000

Salary Payable Cr. Br.25,000

To record the utility bill received:

Date: December 31, 2013

Accounts Debit/Credit:

Utility Expense Dr. Br.4,000

Accounts Payable Cr. Br.4,000

Note that the utility expense is recorded in the period when it was incurred, which is December 2013, even though it will be paid in January 2014.

The above entries can be reversed in January 2014 when the payments are made to the employees and utility company, respectively. The reversal entries will be:

To reverse the entry for employee earnings:

Date: January 7, 2014

Accounts Debit/Credit:

Salary Payable Dr. Br.25,000

Cash Cr. Br.25,000

To reverse the entry for utility expense:

Date: January 7, 2014

Accounts Debit/Credit:

Accounts Payable Dr. Br.4,000

Cash Cr. Br.4,000

The above entries will ensure that the expenses are recorded in the correct period and the payments are properly accounted for.