Question

During the current year, Hainzel Corp.'s income statement shows that the company accrued salary expense of 85,000; for the same period the salaries payable balance decreased by3,000. The journal entry to derive cash paid for salaries would include debits to (Select all that apply.)

1) Cash
2) Salaries Payable
3) Salary Expense
4) Accounts Payable

Answer 1

The correct answer is option 3) Salary Expense.

Step-by-step explanation:

To determine the cash paid for salaries at Hainzel Corp, we need to analyze both the salary expense and the change in the salaries payable balance.

The salary expense recorded is $85,000, which is the total cost of salaries that the company has recognized as an expense for the period. Since the salaries payable balance has decreased by $3,000, it indicates that the company paid more than the expense it recorded; it also paid off some salary that was accrued from a previous period.

Therefore, to calculate the total cash paid for salaries, we will add the decrease in salaries payable to the salary expense. The calculation is $85,000 + $3,000 = $88,000.

The corresponding journal entry would include a debit to Salary Expense for $85,000, a debit to Salaries Payable for $3,000, and a credit to Cash for the total amount paid, which is $88,000. Accounts Payable is not involved in this transaction unless it specifically pertains to salaries, which is not indicated by the question.

The options that involve debits in the journal entry for the cash paid for salaries would be:

• Cash - because cash is decreasing as it's being paid out.
• Salaries Payable - if there's a decrease, meaning payment of liabilities related to salaries.