ExpertEasy1 markMultiple Choice
CPA · Question 30 · Area II: Balance Sheet Accounts
A company pays its employees every two weeks. The current pay period ends on Friday, January 3, Year 2. Employees worked 8 days in Year 1 and 2 days in Year 2 for this period. Total payroll for the period is $50,000. What adjusting entry should be made on December 31, Year 1?
A company pays its employees every two weeks. The current pay period ends on Friday, January 3, Year 2. Employees worked 8 days in Year 1 and 2 days in Year 2 for this period. Total payroll for the period is $50,000. What adjusting entry should be made on December 31, Year 1?
Answer options:
A.
Debit Wages Expense $50,000; Credit Wages Payable $50,000
B.
Debit Wages Expense $40,000; Credit Wages Payable $40,000
C.
Debit Wages Expense $10,000; Credit Wages Payable $10,000
D.
No entry required
How to approach this question
Calculate the daily rate ($50,000 / 10 days = $5,000). Count the days worked in Year 1 (8 days). Accrue that amount.
Full Answer
B.Debit Wages Expense $40,000; Credit Wages Payable $40,000✓ Correct
B
Total days in pay period = 10 (2 weeks x 5 days). <br/>Days in Year 1 = 8. <br/>Accrual = $50,000 × (8/10) = $40,000. <br/>Entry: Debit Wages Expense, Credit Wages Payable.
Common mistakes
Accruing the cash payment amount instead of the incurred amount.
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