Question

On July 20, Dress Right Clothing Corporation paid employees $5,000 for salaries for the first half of the month. Assume that salaries for the second half of July are $5,500 and will be paid in early August. What is the adjusting entry for salaries expense at the end of July?

A) Debit Salaries Expense $5,000, Credit Cash $5,000
B) Debit Salaries Expense $5,500, Credit Cash $5,500
C) Debit Salaries Expense $10,500, Credit Cash $10,500
D) Debit Salaries Expense $5,500, Credit Salaries Payable $5,500

Answer 1

The correct adjusting entry at the end of July for Dress Right Clothing Corporation is Debit Salaries Expense $5,500, and Credit Salaries Payable $5,500, to account for unpaid salaries incurred.

Step-by-step explanation:

The correct adjusting entry for the salaries expense at the end of July is Debit Salaries Expense $5,500, Credit Salaries Payable $5,500. Since Dress Right Clothing Corporation incurred $5,500 in salaries expenses for the second half of July but has not paid them out by the end of the month, the company must recognize the expense and the associated liability. This is done with an adjusting entry that increases (debits) salaries expense and increases (credits) salaries payable, reflecting an obligation to pay the amount in the future.