Final answer:
The cash paid for salaries is derived by adding the accrued salary expense to the decrease in salary payable for the period; in this case, $85,000 plus $3,000 equals $88,000. The journal entry includes a credit to Cash for the total cash paid.
Step-by-step explanation:
The student has asked how to derive the cash paid for salaries when Hainzel Corp.'s income statement shows accrued salary expense of $85,000, and the salary payable balance has decreased by $3,000. To calculate the actual cash paid for salaries, one must adjust the accrued salary expense by the change in salary payable. Since the salary payable has decreased, it means that more cash was paid out than the salary expense recognized for the period. In this case, the cash paid for salaries is the salary expense plus the decrease in payable, which is $85,000 + $3,000, totaling $88,000.
To record the cash paid for salaries, the journal entry will have a debit to Salary Expense for $85,000 to recognize the expense, a debit to Salary Payable for $3,000 to record the decrease in liability, and a credit to Cash for $88,000, which is the total amount paid out.
For example, the self-check question provided is about a firm's accounting profit, which is calculated by deducting all expenses from the sales revenue. If a firm had sales revenue of $1 million and expenses totaling $950,000 for labor, capital, and materials, the accounting profit would be the difference, equating to $50,000.