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Chapter 13: 8BE (page 658)

Mayaguez Corporation provides its officers with bonuses based on net income. For 2017, the bonuses total $350,000 and are paid on February 15, 2018. Prepare Mayaguez’s December 31, 2017, adjusting entry and the February 15, 2018, entry.

Short Answer

Expert verified

On December 31, 2017, salaries and wages expenses will be debited and salaries and wages payable will be credited by $350,000, respectively.

On February 15, 2018, salaries and wages payable will be debited and cash will be credited by $350,000, respectively.

Step by step solution

01

Explanation on salaries and wages payable

Salaries and wages payable are the accrued expenses related to salaries, wages, or bonuses, which will be paid in the future. It is reported as a current liability.

02

Journal entries

Date

Accounts & Explanations

Debit

Credit

Dec.31,2017

Salaries and Wages Expense

$350,000

Salaries and Wages Payable

$350,000

To record accrued bonuses

Feb.15, 2018

Salaries and Wages Payable

$350,000

Cash

$350,000

To record payment of bonuses

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Most popular questions from this chapter

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Distinguish between a determinable current liability and a contingent liability. Give two examples of each type.

(Gain on Sale of Investments and Comprehensive Income) On January 1, 2017, Acker Inc. had the followingbalance sheet.

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ACKER INC.

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Net income \)35,000

Instructions

(Assume all transactions during the year were for cash.)

(a) Prepare the journal entry to record the sale of the available-for-sale debt securities in 2017.

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(d) Prepare a balance sheet as of December 31, 2017.

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