Question

1. The weekly salaries bill for Credo Ltd is $70 000 for a five-day working week....

1.

The weekly salaries bill for Credo Ltd is $70 000 for a five-day working week. Employees are paid on Friday for work completed to Thursday. If 30 June 2016 fell on a Wednesday, what would be the accrued salaries payable on 30 June 2016?

A.

$42 000

B.

$28 000

C.

$14 000

D.

None of the answers provided

2. O’Brien Pty Ltd pays salaries on Friday to cover the five working days prior to the Friday. The weekly wages bill is $100 000. 30 June 2016 falls on a Monday. The adjusting journal entry on 30 June 2016 will be:

A.

Dr Wages expense      $20 000              Cr Accrued wages      $20 000

B.

Dr Wages expense      $40 000              Cr Accrued wages      $40 000

C.

Dr Accrued wages       $20 000              Cr Wages expense     $20 000

D.

Dr Accrued wages       $40 000              Cr Wages expense     $40 000

please show me the reason.

Homework Answers

Answer #1

1. Employees are paid on Friday for work completed to Thursday. Number of working days in a week is five i.e., Sunday, Monday, Tuesday, Wednesday and Thursday. If 30 June 2016 fell on a Wednesday, the salaries would be accrued for 4 days i.e., from Sunday to Wednesday.

Accrued Salaries Payable on 30 June 2016 = ($70,000 / 5) * 4 = $56,000.

Hence the answer is D. None of the answers provided.

2. Salaries are paid on Friday to cover the five working days prior to the Friday i.e., from Sunday to Thursday. If 30 June 2016 fell on a Monday, the salaries would be accrued for 2 days i.e., for Sunday and Monday. The journal entry for accrued salary would be wages expense is debited and Accrued wages is credited.

Accrued Salaries Payable on 30 June 2016 = ($100,000 / 5) * 2 = $40,000.

Hence the answer is B. Dr Wages expense $40,000 Cr Accrued wages    $40,000.

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