Question

Assume that Best Buy made a December 31 adjusting entry to debit Salaries and Wages Expense and credit Salaries and Wages Payable for $4,200 for one of its departments. On January 2, Best Buy paid the weekly payroll of $7,000. Prepare Best Buy's (a) January 1 reversing entry; (b) January 2 entry (assuming the reversing entry was prepared); and (c) January 2 entry (assuming the reversing entry was not prepared).

A. Salaries and Wages Payable........4,200
Salaries and Wages Expense...........................4,200
B. Salaries and Wages Expense........7,000
Cash..........................................................7,000
C. Salaries and Wages Payable........4,200
Salaries and Wages Expense.......2,800
Cash............................................................7,000

Answer 1

Best Buy's accounting situation regarding a December 31 adjusting entry requires a reversing entry on January 1 and a payroll payment entry on January 2, either with or without the reversing entry. Reversing entries simplify the new period's recording, but accuracy can be maintained regardless.

Step-by-step explanation:

The subject of this question involves the accounting process for adjusting entries, reversing entries, and recording payroll transactions in a business setting. A reversing entry is an optional accounting procedure which is the exact opposite of an adjusting entry made in the previous period. Below are the journal entries required for Best Buy's case.January 1 Reversing Entry:Salaries and Wages Expense 4,200 Salaries and Wages Payable 4,20This entry nullifies the adjusting entry made on December 31 but does not affect the overall financial statements.January 2 Entry (with reversing entry prepared):Salaries and Wages Expense 7,000
Cash 7,000

Since the reversing entry was made, the entire amount paid is treated as an expense in the new period.January 2 Entry (without reversing entry prepared):

Salaries and Wages Payable 4,200
Salaries and Wages Expense 2,800
Cash 7,000
Without the reversing entry, the already accrued salaries and wages are cleared from the payable account, and the remaining balance is expensed.Conclusion: Reversing entries simplify the recording of transactions in the new period, but even if they are not made, careful accounting can ensure accurate reporting of salaries and wages expense and payables.