Question

Accrued payroll was $10,000 and $5,000 at the beginning and end of 20X9, respectively. The payroll expense for 20X9 totaled $480,000. Cash outflow for payroll during 20X9 totaled:

1) $490,000
2) $485,000
3) $480,000
4) $5,000

Answer 1

To determine the cash outflow for payroll in 20X9, the payroll expense is adjusted for the change in accrued payroll. The correct answer is 2).

Step-by-step explanation:

The student is asking about the total cash outflow for payroll during the year 20X9. To calculate this, we need to adjust the total payroll expense by the change in accrued payroll. The payroll expense for the year is given as $480,000. We had an accrued payroll of $10,000 at the beginning of the year and $5,000 at the end of the year.

Therefore, the change in accrued payroll is the beginning balance minus the ending balance ($10,000 - $5,000 = $5,000). The formula to determine the cash outflow for payroll would be: Payroll Expense + Decrease in Accrued Payroll - Increase in Accrued Payroll.

Here, it translates to $480,000 + $5,000, since the accrued payroll decreased by $5,000 during the year. Therefore, the cash outflow for payroll is $485,000.