Suppose Koehl starts selling on a credit basis on December 1, giving customers 30 days to pay. All customers accept these terms, and all other facts in the problem are unchanged. What would the company's loan requirements be at the end of December in this case

A. Debit Salaries Expense $5,400; Credit Salaries Payable $5,400

Explanation:

In the given case per day expense of salary = $1,800

Salary is paid every Monday for preceding week of 5 days.

The year ends on 31 December that is Wednesday, which means 3 days salary Monday, Tuesday and Wednesday will be liability outstanding at year end on 31 Dec and will be paid on upcoming Monday which will fall in next year.

Therefore Salary for current year for 3 days i.e. $1,800 X 3 = $5,400 will be liability for current year.

With the rule all expenses are debited Salaries Expense will be debited with $5,400 on 31 Dec

With the rule that all liabilities have credit balance Salaries Payable will be credited as a outstanding liability with $5,400 on 31 Dec.

A. Debit Salaries Expense $5,400; Credit Salaries Payable $5,400