Question

Greedy Company paid salaries of $20,000 during the year. In addition, $8,800 in salaries has accrued by the end of the year but has not been paid. The year-end adjusting entry would include which one of the following?

Answer 1

Greedy Company's year-end adjusting entry would involve debiting Salary Expense and crediting Accrued Salaries Payable for the $8,800 of salaries accrued but not paid. The firm from the self-check question made an accounting profit of $50,000, calculated by subtracting total expenses from sales revenue.

Step-by-step explanation:

The year-end adjusting entry for Greedy Company, which paid salaries of $20,000 during the year and has accrued $8,800 in salaries not yet paid by the end of the year, would include a debit to Salary Expense and a credit to Accrued Salaries Payable. The debit increases the expense, reflecting the cost of salaries earned by employees but not yet paid, thus matching expenses with revenues of the period they relate to. The credit to Accrued Salaries Payable represents the company's obligation to pay these salaries in the future.

To answer the self-check question, the firm's accounting profit would be calculated as follows: Total revenue minus the sum of all expenses. In numerical terms, this would be $1 million (sales revenue) minus ($600,000 (labor) + $150,000 (capital) + $200,000 (materials)), resulting in an accounting profit of $50,000.