Question

Majerek Company accrues salaries at year-end. What is the financial statement effect of this adjusting entry? (Select all that apply.)

a)Retained earnings is decreased.
b)Net income is decreased.
c)Expense is increased.
d)Assets are decreased.

Answer 1

Accruing salaries at year-end has the financial statement effect of increasing expense, decreasing net income, and decreasing retained earnings.

Step-by-step explanation:

The financial statement effect of accruing salaries at year-end is as follows:

• Expense is increased
• Net income is decreased
• Retained earnings is decreased

When salaries are accrued, an expense is recorded on the income statement, which increases expenses and decreases net income. Additionally, since accrued salaries are a liability, they decrease retained earnings on the balance sheet.