Question

As of December 31, we owe employees $35,000 of wages that we won't pay until January 3. At January 5 we pay the previous period's wages plus another $15,000 earned by employees in the new year. Give the adjusting entry at December 31 to account for the amounts we owe our employees.

Answer 1

An adjusting entry for $35,000 is made at the end of the year to account for wages owed to employees, debiting Wages Expense and crediting Wages Payable or Accrued Wages.

Step-by-step explanation:

The student's question relates to accounting for accrued expenses at the year-end. When a company owes wages to employees at the end of an accounting period that are not paid until the next period, an adjusting entry is required to recognize the expense and the associated liability. The adjusting entry at December 31 for the $35,000 in wages owed to employees will be to debit the Wages Expense account and credit the Wages Payable or Accrued Wages account.

Adjusting Journal Entry on December 31:

• 
  
• Debit Wages Expense: $35,000
• 
  
• Credit Wages Payable/Accrued Wages: $35,000

This entry records the obligation to pay the employees and the expense incurred during the current period, even though the cash payment will be in the next period. The wages payable will then be cleared when the payment of $50,000 ($35,000 from the previous period plus $15,000 earned in the new year) is made on January 5.