Bentley Records Adjusting Entries at Its December 31 Year End

question 109

Multiple Choice

Bentley 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:

Holder in Due Course

A party who has acquired a negotiable instrument in good faith and for value, and thus has certain protections against defenses and claims that could be raised against the prior holder.

Indorsement

The act of signing one's name on a financial document, such as a check, thereby transferring rights or title to another party.

Collection Indorsement

An endorsement on a negotiable instrument, such as a check or promissory note, that specifies the particular person to whom the payment is to be made.

Fictitious Payee Rule

A principle in commercial law that protects the drawer of a check if the check is made payable to a non-existent or not intended recipient, under certain conditions.