Question

Smyth Company pays its employees every Friday for a 5-day workweek (Monday through Friday). The employees...

Smyth Company pays its employees every Friday for a 5-day workweek (Monday through Friday). The employees earn $5,000 per day of work. The most recent workweek began on Monday, October 6, 2005. The accounting period ends on Thursday October 9, 2005, and the company will issue paychecks totalling $25,000 on Friday, October 10, 2005. The entry into the journal of Billie Smyth Company on Thursday, October 9, 2005 would include a:
  • A.

    Debit to wages expense for $25,000.

  • B.

    Debit to wages expense for $25,000.

  • C.

    Credit to cash for $25,000.

  • D.

    Credit to wages payable for $20,000.

Business   Accounting   
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Homework Answers

Answer #1

Wages expense per day = $5,000

Accounting period ends on October 9, Thursday.

Hence, on October 9, wages have accrued for 4 days (Monday to Thursday)

Wages payable on October 9 = Wages expense per day x 4

= 5,000 x 4

= $20,000

The following journal entry will be made on October 9, 2005:

Date General Journal Debit Credit
October 9, 2005 Wages expense $20,000
Wages payable $20,000
( To record wages expense)

The entry into the journal of Billie Smyth Company on Thursday, October 9, 2005 would include a: Credit to wages payable for $20,000.

Correct option is D.

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