Homework SourseOn December 31 Year 1 Viewsonic Corporation owed 4500 in sal
On December 31, Year 1, Viewsonic Corporation. owed $4,500 in salaries to employees who had worked during December but would be paid in January. If the year-end adjustment is properly recorded on December 31, Year 1, what will be the effect of this accrual on the following items for Viewsonic Corporation?
A. Option C
B. Option B
C. Option D
D. Option A
| Net Income | Cash Flow from Operating Activities | |
| a. | No effect | No effect |
| b. | Decrease | No effect |
| c. | Increase | Decrease |
| d. | No effect | Decrease |
Solution
SOLUTION
Correct option is Option B i.e Net income will decrease and no effect on Cash flow from operating activities.
Year end adjustment entry would be-
Salaries expense Dr. 4,500
Salaries payable Cr. 4,500
Salaries expense is an expense, which will be shown in income statement and results in decrease in income.
Salaries expense is a balance sheet item, it will have no effect on Cash flow from operating activities.
