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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Kalysa Smith · Accepted Answer

Final Answer : D, Explanation :  The best choice is to debit Salaries payable $12,000 and credit Salaries expense $12,000 to reverse the effect of the December 31 salary expense accrual. This is because the employees had earned $12,000 in unpaid and unrecorded salaries by December 31, and this expense needs to be recognized in the 2019 financial statements. Since the next payday is January 3, the $30,000 payment will be recorded in 2020, and thus no cash entry is needed at this time.

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