Question

Colaw Co. pays all salaried employees on a biweekly basis. Overtime pay, however, is paid in the next biweekly period. Colaw accrues salaries expense only at its December 31 year end. Data relating to salaries earned in December 2017 are as follows:Last payroll was paid on 12/26/17, for the 2-week period ended 12/26/17.Overtime pay earned in the 2-week period ended 12/26/17 was $25,000.Remaining work days in 2017 were December 29, 30, 31, on which days there was no overtime.The recurring biweekly salaries total $450,000.Assuming a five-day workweek, Colaw should record a liability at December 31, 2017 for accrued salaries of---

Answer 1

Colaw Co. should record a liability at December 31, 2017, for accrued salaries of $450,000, which consists of the regular biweekly salaries without overtime pay.

Step-by-step explanation:

Colaw Co. should record a liability at December 31, 2017, for accrued salaries of $450,000.

This amount consists of the regular biweekly salaries of $450,000, which need to be accrued because they were earned but not yet paid by the end of the year. Since the last payroll was paid on 12/26/17, any overtime pay earned in the 2-week period ending 12/26/17 would be paid out in the next biweekly period. Therefore, the $25,000 of overtime pay earned in that period is not included in the accrued salaries at December 31, 2017.

To summarize, the accrued salaries for December 2017 consist of the regular biweekly salaries of $450,000, with no overtime pay included.