When Honest Abe received his paycheck, he realized that his employer made an error in computing his wages, and overpaid him by $1,300. So he promptly returned the excess amount.
When the employer receives a check from Abe for the amount of the overpayment, what is the effect of transaction to the employer?
A) Increase Cash and decrease Wages Expense
B) Increase Wages Expense and decrease Cash
C) Increase Cash and Increase Wages Payable
D) Decrease Wages Payable and decrease Wages Expense

Question

Quizplus · Accepted Answer

When Abe returns the overpaid amount, the employer's cash increases because they are receiving money back. The wages expense decreases because the initial overpayment error inflated the expense, and returning the money corrects this overstatement.

When Honest Abe Received His Paycheck, He Realized That His