Final answer:
The journal entry for Blackwell Corporation paying $18,000 in salaries for the current month is a debit to Salaries Expense for $18,000 and a credit to Cash for $18,000, reflecting the salary costs incurred and the reduction in cash.
Step-by-step explanation:
When Blackwell Corporation pays salaries for the current month amounting to $18,000, the journal entry will reflect a decrease in cash and an increase in expenses. This is a typical transaction reflecting the day-to-day operations of a company, where incurring salary expenses is quite common. To record this transaction, the salaries expense, which is an operating expense, is debited and the cash account is credited, because this outflow of cash reduces the company's cash balance.
Here is the journal entry that should be made on May 5:
- Debit: Salaries Expense $18,000
- Credit: Cash $18,000
This entry is made because, under the accrual basis of accounting, expenses are recorded when they are incurred, not necessarily when cash is paid out. The salaries expense is recognized because the employees have earned their pay for the current month. At the same time, the company's asset, cash, is decreased as it is paying out this money.