Flagg Records Adjusting Entries at Its December 31 Year End

question 87

Multiple Choice

Flagg records adjusting entries at its December 31 year end.At December 31,employees had earned $12,000 of unpaid and unrecorded salaries.The next payday is January 3,at which time $30,000 will be paid.Prepare the January 1 journal entry to reverse the effect of the December 31 salary expense accrual.

• A)Debit Salaries expense $12,000;credit Salaries payable $12,000.
• B)Debit Salaries expense $18,000;debit Salaries payable $12,000;credit Cash $30,000.
• C)Debit Salaries payable $18,000;credit Cash $18,000.
• D)Debit Salaries payable $12,000,credit Salaries expense $12,000.
• E)Debit Salaries expense $18,000;credit Salaries payable $18,000.

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Definitions:

Futures Contract

A legal agreement to buy or sell a particular commodity or asset at a predetermined price at a specified time in the future.

Margin

The difference between the selling price of a product and the cost of producing or purchasing it, or the collateral required to secure a loan or derivative position.

Zero Coupon Interest Rate

A rate of interest reflecting the discount from par at which zero-coupon bonds are sold. This rate is not paid annually but at maturity.

Arbitrage Profit

Profit earned from buying and selling the same asset in different markets to take advantage of differing prices for the same asset.