Question

BE3-13 (L08) Assume that Best Buy made a December 31 adjusting entry to debit Salaries and Wages Expense and credit Salaries and Wages Payable for \(4,200 for one of its departments. On January 2, Best Buy paid the weekly payroll of \)7,000. Prepare Best Buy’s (a) January 1 reversing entry; (b) January 2 entry (assuming the reversing entry was prepared); and (c) January 2 entry (assuming the reversing entry was not prepared).

Short answer

Salary and wages expense amount is $7,000.

Step-by-step solution

Meaning of Reversing Entries:

Journal entries posted at the initiation of the financial year to rescind the impact of adjusting entries of the previous year is known as reversing entries. It helps in the continuity of accounting.

Closing Entries

Date	Accounts and Explanation	Debit $	Credit $
January, 1	Salaries and Wages Payable	$4,200
	Salaries and Wages Expenses		$4,200
January, 2	Salary and Wages Expenses	$7,000
	Cash		$7,000
January, 2	Salary and Wages Payable	$4,200
	Salary and Wages Expenses	$2,800
	Cash		$7,000