Question

Edge Company's salaried employees are paid biweekly. Occasionally, advances made to employees are paid back by payroll deductions. Information relating to salaries for the calendar year 2013 is as follows:

12/31/12 12/31/13
Employee advances $24,000 $ 36,000
Accrued salaries payable 130,000 ?
Salaries expense during the year 1,300,000
Salaries paid during the year (gross) 1,250,000
At December 31, 2013, what amount should Edge report for accrued salaries payable?
a. $180,000.
b. $168,000.
c. $144,000.
d. $50,000

Answer 1

b. $168,000.

At December 31, 2013, Edge Company should report $168,000 for accrued salaries payable, which is calculated through the yearly salaries expense, gross salaries paid, beginning accrued salaries, and employee advances.

Step-by-step explanation:

To calculate the accrued salaries payable at December 31, 2013, begin by determining the total salaries expense for the year and subtracting the total salaries actually paid out. The formula to calculate the accrued salaries payable is:

Accrued Salaries Payable = Salaries Expense - Salaries Paid + Beginning Accrued Salaries Payable - Advances Made (since they reduce the liability)

Now apply the numbers from Edge Company's information:

• Salaries Expense during the year: $1,300,000
• Salaries Paid during the year (gross): $1,250,000
• Beginning Accrued Salaries Payable (12/31/12): $130,000
• Employee Advances at the beginning of the year (12/31/12): $24,000
• Employee Advances at the end of the year (12/31/13): $36,000

Advances made during the year can be calculated by subtracting the beginning advances from the ending advances:

Advances Made During the Year = Ending Employee Advances - Beginning Employee Advances = $36,000 - $24,000 = $12,000

Now we have:

Accrued Salaries Payable = $1,300,000 - $1,250,000 + $130,000 - $12,000

Accrued Salaries Payable = $50,000 + $130,000 - $12,000

Accrued Salaries Payable = $168,000

Therefore, at December 31, 2013, Edge Company should report $168,000 for accrued salaries payable.