Question

During 2018, the first year of operations, Silver, Inc., pays salaries of $175,000. At the end of the year, employees have earned salaries of $20,000, which are not paid by Silver until early in 2019. What is the amount of the deduction for salary expense?

Answer 1

Answer:

If Silver uses the accrual method, $195,000 in 2018 and $0 in 2019.

Explanation:

Given that,

Salaries paid during the year 2018 = $175,000

Salaries earned by the employees at the end of the year = $20,000

If the Silver, Inc. uses the accrual method,

Deduction for salary expense in 2018:

=  Salaries paid during the year 2018 + Salaries earned by the employees at the end of the year

= $175,000 + $20,000

= $195,000

Deduction for salary expense in 2019 = $0