Question

Hansen Legal offices are open Monday through Friday, and Hansen pays employees salaries of $35,000 every other Friday. During the current year December 31 falls on a Wednesday, and the next payday is January 9. Required: Given this information, determine the adjusting journal entry that Hansen must make on December 31 as well as the journal entry to record the payment of the payroll on January 9. If an amount box does not require an entry, leave it blank.

Answer 1

For Monday to Friday , $35000
So per one day = 35000/5			$7,000
The 5 days salary will be paid on next Friday.
During the current year, December 31 falls on 31.							Dec-31	Wednesday
							Jan-01	Thursday
next pay day is january 9.							Jan-02	Friday
							Jan-03	Sat
So for the year end , on december 31 he should book expense for 3 days i.e.,Monday to Wednesday as per accrual concept.							Jan-04	sun
							Jan-05	Mon
Expense amount = 3*7000 =$21000							Jan-06	Tue
							Jan-07	Wednesday
journal entry On december 31 :							Jan-08	Thursday
Wages Expense	$21,000						Jan-09	Friday
To wages payable		$21,000
(Being Wages payable for the end of month)
Debit wages Expense : As services are received from employees this year. This salary is expense for this year.
As per Accounting rule 'Debit all expenses' Salaries expenses A/C must be debited.
Credit wages Payable: As salaries is to be paid in next year, It is not paid. So it is a liabilty for a company. So wages payable A/C is credited.
And on January 9 :
Wages	$ 14,000.00
Wages payable	$ 21,000.00
To cash		$ 35,000.00
( To record the payment of wages)
Since, the amount of wages is paid, the liability should be cancelled so Debited…and for remaining two days i.e, Jan 1 and Jan2 The amount will be paid in cash so booked as an expense