E4-18 Lovrek Company pays salaries of $12,000 every Monday for the preceding 5-d

Question

E4-18 Lovrek Company pays salaries of $12,000 every Monday for the preceding 5-day Use re week (Monday through Friday). Assume December 31 falls on a Tuesday, so Lovrek's (Lo) employees have worked 2 days without being paid. Instructions (a) Assume the company does not use reversing entries. Prepare the December 31 adjust- ing entry and the entry on Monday, January 6, when Lovrek pays the payroll. (b) Assume the company does use reversing entries. Prepare the December 31 adjusting entry, the January 1 reversing entry, and the entry on Monday, January 6, when Lovrek pays the payroll E4-19 On December 31, the adjusted trial balance of Shihata Employment Agency shows Prepa the following selected data. entrie LO 2 Accounts Receivable Interest Expense $24,500 7,700 Service Revenue $92,500 Interest Payable 2,200

Explanation / Answer

a) Company does not use Reversing Entries Adjusting Entry Debit Credit Dec-31 Salaries Expense $ 4,800.00 Salaries Payable $    4,800.00 Salaries Accrued 12000*2/5= $ 4800 Entry on Monday, January 6, when Lovrex pays the payroll. Debit Credit 6th January Salaries Expense $ 7,200.00 Salaries Payable $ 4,800.00 Cash $ 12,000.00 Remaining salary=12,000-4,800= 7,200 b Company use Reversing Entries Adjusting Entry Debit Credit Dec-31 Salaries Expense $    4,800.00 Salaries Payable $    4,800.00 January 1 reversing entry Debit Credit Jan-01 Salaries Payable $    4,800.00 Salaries Expense $    4,800.00 Entry on Monday, January 6, when Lovrex pays the payroll. Debit Credit 6th January Salaries Expense $ 12,000.00 Cash 12000

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