Graystone Company's plant operates five days per week with a daily payroll of $100,000. Employees are paid every Tuesday for the prior week's work (Monday through Friday). The last day of the month is Tuesday, April 30. What effect does the accrual at April 30 have on Graystone's net income?

Question

Quizplus · Accepted Answer

Since payroll is paid every Tuesday for the prior week's work, there will be an accrual at April 30 for the last week of April, which is Monday, April 29 and Tuesday, April 30. This means that two days of payroll, totaling $200,000 ($100,000/day x 2 days), will be accrued at April 30.

Since the accrual is for an expense (payroll), it will decrease Graystone Company's net income by $200,000.

Therefore, the correct answer is C) Decrease by $200,000.

Graystone Company's Plant Operates Five Days Per Week with a Daily