Question

The accountant for Watson Electrical Repair, Inc. failed to make an adjusting entry to record $5,000 of unpaid salaries for the last two weeks of the year. Which of the following statements is true? Select one: A. The total expenses will be overstated. B. The total expenses will be understated. C. The total revenue will be understated. D. The total revenue will be overstated.

Answer 1

B. The total expenses will be understated

Step-by-step explanation:

The adjusting entry is as follows

Wages expense $5,000

To Wages payable $5,000

(Being the wages expense is adjusted)

The wages expense should be debited as it increased the expenses while at the same time the wages payable should be credited as it also increased the liabilities account

Since this above adjusting entry of unpaid salaries for $5,000 is failed to recorded due to which the total expenses will be understated instead of overstated

Hence, the correct option is B.