Question

Pablo Management has ten part-time employees, each of whom earns $135 per day. They are paid on Fridays for work completed Monday through Friday of the same week. Near year-end, the ten employees worked Monday, December 31, and Wednesday through Friday, January 2, 3, and 4. New Year's Day. (January 1) was an unpaid holiday.

A) Prepare the adjusting entry that would be recorded on Monday, Dec 31.
B) Prepare the journal entry that would be made to record payment of the eployees' wages on Friday Jan 4.

Answer 1

(A)

wages expense debit 1,350

wages payable credit 1,350

(B)

wages expense debit 4,050

wages payable debit 1,350

cash credit 5,400

Step-by-step explanation:

On december 31th, according to the matching principles we have to record the expenses on the moment on which they ocour regardles of when they are gonna be paid.

So we have 10 employees at $135 each = 1,350 wages expense

because we are not paying on Monday, those wages are unpaid.

So the enry would be:

wages expense debit 1,350

wages payable credit 1,350

Later on Friday we perform the payment of 4 days

10 employees at 135$ each 4 days = $5,400

there are 1,350 of this wages that have been recorded under wages payables, so we have to write them off.

the rest would be wages expenses of the current period:

5,300 - 1,350 = 4,050 wages expenses

so the entry will be

wages expense debit 4,050 (Jan 2nd Jan 3rd Jan 4th)

wages payable debit 1,350 (Dec 31th)

cash credit 5,400 (the employees get pay for the 4 days they work)