Question

Starlight Associates, Inc. recorded salary expense of $100,000 in 2017. However, additional salaries of $5,000 had been earned, but not paid or recorded at December 31, 2017. After the adjustments are recorded and posted at December 31, 2017, what are the balances in the Salaries Expense and Salaries Payable accounts?

Salaries Expense Salaries Payable

a.

$105,000 $0

b.

$105,000 $5,000

c.

$100,000 $5,000

d.

$100,000 $0

Answer 1

Answer

• Adjustment of Salaries expense incurred BUT not paid will:
  >Increase the Salaries expense, and
  >Increase Salaries Payable Liability.
• Hence,
  Salaries expense will become $100000 + 5000 = $ 105,000
  Salaries payable will become equal to unpaid salaries accrued, which is $ 5000
• Correct Answer = Option ‘B’ $ 105000 [Salaries expense], and $ 5000 [Salaries payable]