Question

What journal entries are required to record $250,000.00 in salaries earned during the last week of July but paid in Aug?

A. Debit salary expense; credit salary payable
B. Debit salary payable; credit payroll checking
C. Debit liabilities; credit salary expense
D. Debit assets; credit salary expense

Answer 1

The proper journal entry to record salaries earned but not yet paid is to debit Salary Expense and credit Salaries Payable (Answer A).

Step-by-step explanation:

The journal entries required to record the $250,000.00 in salaries earned during the last week of July but paid in August would be:

• Debit Salary Expense for $250,000.00.
• Credit Salaries Payable for $250,000.00.

This entry records the salaries as an expense in July when they were earned, even though they are paid in August, aligning with the accrual basis of accounting. Therefore, the correct answer is A. Debit salary expense; credit salary payable.

SELF-CHECK QUESTIONS

1. A firm had sales revenue of $1 million last year. It spent $600,000 on labor, $150,000 on capital, and $200,000 on materials. The firm's accounting profit is calculated as follows:

Sales Revenue - Labor Costs - Capital Costs - Materials Costs = Accounting Profit

$1,000,000 - $600,000 - $150,000 - $200,000 = $50,000

Therefore, the firm's accounting profit was $50,000.