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The employees of Xitrex, Inc., are paid each Friday. The company’s fiscal year-end is June 30, which falls on a Wednesday for the current year. Salaries are earned evenly throughout the five-day work week, and $18,000 will be paid on Friday, July 2. Required: 1. Prepare an adjusting entry to record the accrued salaries as of June 30, a reversing entry on July 1, and an entry to record the payment of salaries on July 2.2. Prepare journal entries to record the accrued salaries as of June 30 and the payment of salaries on July 2 assuming a reversing entry is not recorded

Respuesta :

Shahzaibfaraz

Answer:

1. 30 JUNE   Salaries Expense 10800 Dr

                        Salaries Payable  10800 Cr

1 JULY           Salaries Payable 10800 Dr

                        Salaries Expense  10800 Cr

2 JULY          Salaries Expense 18000 Dr

                        Cash                        18000 Cr

2. 30 June   Salaries Expense 10800 Dr

                         Salaries Payable   10800 Cr

  2 July        Salaries Expense   7200 Dr

                     Salaries Payable   10800 Dr

                         Cash                       18000 Cr

Explanation:

1. We record the entry at the end of the fiscal period based on accrual principle and record the expense related to that period. This is why we debited the expense that was already due ( 18000/5 * 3) and recorded as an expense and as a payable as payment will be made on 2 July.

In reversing entries, we reverse an adjusting entry back on the start of next period. Then we record the entry again on payment day. The effect on expenses for this year, however, is unchanged as there is 10800 on credit side in Wages expense and the effect of crediting 18000 is still 7200 (18000- 10800).

2. If we don't pass a reversal entry, we just record the normal accrual entry at the end of the period and debit the liability ( Wages payable) and the remaining expense when payment is made on July 2.

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