Question

On July​ 15, Year​ 1, Southeastern University hired an associate professor for its Math Department at an annual​ (12- month) salary of​ $150,000. The salary is effective for its new school​ year, which commences August​ 16, and is payable in four quarterly calendar installments. Assuming that the university records journal entries on a monthly​ basis, what is the adjusting journal entry​ (if any) for August​ 31, Year​ 1?

Answer 1

Debit Salaries expense $6,250

Credit Salaries Payable $6,250

Step-by-step explanation:

The University uses the accrual basis of accounting an as such though the amount to be paid to the hired professor will be paid in four quarterly calendar installments, the amount incurred has to be recorded at the end of the month even when the university is yet to pay.

Given that Annual pay = $150,000

Monthly pay = 1/12 × $150,000 = $12,500

Between August​ 16 and August​ 31, Year​ 1 is half the month hence the salaries expense = 1/2 × $12,500 = $6,250

The adjusting journal entry​ for August​ 31, Year​ 1 would be

Debit Salaries expense $6,250

Credit Salaries Payable $6,250

Being entries to recognize the associate professor salary between August​ 16 and August​ 31, Year​ 1.