Question

Walker Company’s employee earn $210 per day and are paid on Friday for a five-day work week. This year, December 31 is a Thursday. If approriate adjusting entry is not made at the end of the year, what will bet he effect on:

A. Income statement accounts (overstated, understand or no effect)?

Answer 1

If the appropriate adjusting entry is not made at the end of the year, it will have an overstated effect on the income statement accounts.

Step-by-step explanation:

If the appropriate adjusting entry is not made at the end of the year, it will have an overstated effect on the income statement accounts.

When the company pays its employees on Friday, December 31 will fall within the five-day work week. However, since December 31 is a Thursday, the company will not have properly accounted for the wages earned on that day.

This means that the company's expenses for the year will be overstated because the wages earned on December 31 will be included in the current year's expenses, even though they should be recorded as an expense in the following year.