On the financial statements prepared at the end of its first year of operations, the company must show an accurate picture of all expenses and all liabilities incurred. The last payday of the year was December 18. However, the payment to the employees on that day did not include the weeks ending December 19 and 26 and the four days (December 28–31) in the following week. These earnings will be reflected in the January payrolls. Two-column journal paper is provided for use in journalizing the following entry on page 7-23.

Prepare the adjusting entry as of December 31 to record the salaries and wages that have accrued but remain unpaid as of the end of the year. When calculating the amount of the accrual for each hourly worker, assume each employee worked eight hours on each day during the period with no overtime (student works a 36-hour week—student worked 32 hours for the period December 28 through December 31). For each salaried worker, the accrual will amount to 14/10 of the worker’s biweekly earnings, except for Zimmerman who worked only 10 days.

Each of the labor cost accounts should be debited for the appropriate amount of the accrual, and Salaries and Wages Payable should be credited for the total amount of the accrual. There is no liability for payroll taxes on the accrued salaries and wages until the workers are actually paid. Therefore, the company follows the practice of not accruing payroll taxes.