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.

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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