Hormel Co. follows the practice of recording prepaid expenses and unearned reven

Question

Hormel Co. follows the practice of recording prepaid expenses and unearned revenues in balance sheet accounts. Hormel's annual accounting period ends on December 31, 2009. The following information concerns the adjusting entries to be recorded as of that date.

*c. The company has 15 employees, who earn a total of $1,830 in salaries each working day. They are paid each Monday for their work in the five-day workweek ending on the previous Friday. Assume that December 31, 2009, is a Tuesday, and all the 15 employees worked the first two days of that week. Because New Year's Day is a paid holiday, they will be paid salaries for five full days on Monday, January 6, 2010.

**Also, with this problem, the textbook is asking "to record the first subsequent cash transaction in 2010"...

I really appreciate the help! :)

Explanation / Answer

Salary for 2 days ie Dec 30 & Dec 31 will be 2*1830 = $3,660 Salary for remaining 3 working days is 3*1830 = $5,490 Dec 31 Salary Expense Dr $3660 Salary Payable Cr $3660 Salary Payable $3660 will appear in Balance Sheet as on 31 Dec'09 under Current Liability. On 6 Jan'10, when Salary is paid, the entry will look like below :- 6 Jan'10 Salary Payable Dr $3660 Salary Expense Dr $5490 Bank Cr $9,150

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