A Business Pays Salaries of $140,000 on the First and Fifteenth

question 135

Essay

A business pays salaries of $140,000 on the first and fifteenth day of every month.Which of the following is the adjusting entry required on December 31,2011?
A) A debit $140,000 to Salaries expense and a credit $140,000 to Salaries payable.
B) A debit $140,000 to Salaries receivable and a credit $140,000 to Salaries payable.
C) A debit $140,000 to Salaries expense and a credit $140,000 to Salaries receivable.
D) No adjusting entry is required.

• A) A debit $140,000 to Salaries expense and a credit $140,000 to Salaries payable.
• B) A debit $140,000 to Salaries receivable and a credit $140,000 to Salaries payable.
• C) A debit $140,000 to Salaries expense and a credit $140,000 to Salaries receivable.
• D) No adjusting entry is required.

---

Definitions:

Inflation Rates

The rate expressed in percentage at which the overall price level for goods and services increases, leading to a decline in purchasing power.

Inflation

The rate at which the general level of prices for goods and services is rising, eroding purchasing power currency over time.

Creditors

Creditors are individuals, businesses, or financial institutions that lend money or extend credit, expecting to be repaid with interest.

Fixed Incomes

Earnings that do not change over time, such as those from bonds or rents, which provide consistent income but may lose purchasing power over time.