Springfield Company offers a bonus plan to its employees and the amount of the employee bonuses for the current year is estimated to be $32,500 to be paid during January of the following year. The journal entry on December 31 to record the bonuses is:
A. Debit Estimated Bonus Payable $32,500; credit Cash $32,500.
B. Debit Unearned Bonuses $32,500; credit Bonus Payable $32,500.
C. Debit Employee Bonus Expense $32,500; credit Prepaid Employee Bonus $32,500.
D. No entry since the bonuses are not paid until January.
E. Debit Employee Bonus Expense $32,500; credit Bonus Payable $32,500.
Answer: E
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