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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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Chapter
Section
BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

The adjustment for wages earned by employees but not yet paid is

  1. (a) debit Wages Payable and credit Wages Expense.
  2. (b) debit Wages Expense and credit Cash.
  3. (c) debit Wages Expense and credit Wages Payable.
  4. (d) debit Wages Expense and credit Accounts Receivable.

To determine

Provide the adjustment for wages earned by the employees but not yet paid.

Explanation

Adjusting entries:

Adjusting entries are those entries which are recorded at the end of the year, to update the income statement accounts (revenue and expenses) and balance sheet accounts (assets, liabilities, and stockholders’ equity) to maintain the records according to accrual principle basis.

Justification for the incorrect answer:

Option a:

When additional wages earned by the employees are not being paid, it increases the wages expense (debit) and wages payable (credit) account during the end of the year while making adjustments. Therefore, Option a (debit Wages Payable and credit Wages Expense) is an incorrect answer.

Option b:

When additional wages are earned by the employees are not paid it affects the wages expense account and the wages payable account, it does not affect the cash account because when wages are not paid to the employees it increases the debt value of the company. Therefore, Option b (debit Wages expense and credit cash) is an incorrect answer...

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