1. Springfield Company offers a bonus plan to its employees and the amount of th

Question

1. Springfield Company offers a bonus plan to its employees and the amount of the employee bonuses for the current year is estimated to be $967,000 to be paid during January of the following year. The journal entry on December 31 to record the bonuses is:

A. Debit Unearned Bonuses $967,000; credit Bonus Payable $967,000.

B. Debit Employee Bonus Expense $967,000; credit Bonus Payable $967,000.

C. Debit Employee Bonus Expense $967,000; credit Prepaid Employee Bonus $967,000.

D. No entry since the bonuses are not paid until January.

E. Debit Estimated Bonus Payable $967,000; credit Cash $967,000.

Explanation / Answer

Journal entry on Dec 31 to record bonuses is :

B.Debit Employee Bonus Expense $967,000; credit Bonus Payable $967,000

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