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7 May, 21:35

Schneider Inc. had salaries payable of $60,000 and $90,000 at the end of Year1 and Year2, respectively. During Year2, Schneider recorded $620,000 in salaries expense in its income statement. Cash outflows for salaries in Year2 were:

a.

$590,000.

b.

$620,000.

c.

$650,000.

d.

$530,000.

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Answers (1)
  1. 7 May, 21:57
    0
    The correct answer is option (A).

    Explanation:

    According to the scenario, the given data are as follows:

    Salaries payable at the end of year 1 = $60,000

    Salaries payable at the end of year 2 = $90,000

    Salary expense in year 2 = $620,000

    So, we can calculate the cash outflows for salaries in year 2 by using following formula:

    Cash outflow = Salary recorded in year 2 + Salaries payable at the beginning of the year - Salaries payable at the end of year

    = $620,000 + $60,000 - $90,000

    = $590,000

    Hence, the cash outflow for salaries in year 2 is $590,000.
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