Flagg Records Adjusting Entries at Its December 31 Year End

question 30

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

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Definitions:

Indifference Curves

Graphical representations in microeconomics that show different bundles of goods between which a consumer is indifferent.

Maximize Utility

The process of allocating resources to obtain the highest possible satisfaction or utility.

Consumer Equilibrium

A state in which consumers are maximizing their satisfaction, with no incentive to alter their allocation of expenses across goods or services.

Marginal Utility

The change in total satisfaction or utility that a person receives from consuming one additional unit of a good or service.