Question

ABC Company pays its employees $100 per day or $500 for a five-day work week. Salaries are paid every two weeks on a Friday. On December 31 (Wednesday), to record the three days of accrued wages, ABC Company should debit for and credit

A) Accrued Wages Expense and Cash
B) Wages Payable and Cash
C) Cash and Wages Expense
D) Accrued Liabilities and Cash

Answer 1

To record ABC Company's accrued wages for three days, a debit entry to Accrued Wages Expense and a credit entry to Wages Payable for $300 should be made.

Step-by-step explanation:

To record the three days of accrued wages on December 31 (Wednesday), ABC Company should debit Accrued Wages Expense for $300 (3 days × $100 per day) and credit Wages Payable for $300. This is because the work has been performed by the employees, but cash has not yet been disbursed. An accrued expense represents a company's obligation to make a future payment for services or goods already received, in this case, labor.

The journal entry would be:

• Debit Accrued Wages Expense: $300
• Credit Wages Payable: $300

This entry reflects the accumulation of wages that the company owes but has not yet paid. Since the payday is every two weeks on a Friday, these wages will be paid in the next payroll cycle.