Answer the following question:

Lizzys Store has a weekly payroll of $3,500 and pays its employees every Friday. This year, the last day of its fiscal year end is a Wednesday. What type of adjustment is needed at the fiscal year end, and why? Explain your answer as well.

1. Accrued expense. Salaries payable, which is a liability, is settled in this period.
2. Deferred expense. Record salaries expense incurred but not yet paid.
3. Deferred expense. Salaries expense has been incurred and the payment is deferred to next period
4. Accrued expense. Salaries expense has been incurred but not yet paid in this period.
5. Accrued expense. Record the payment of salaries expense.