Bread Basket provides baking supplies to restaurants and grocery stores. During December 2014, Bread Basket's employees worked 2,400 hours at an average rate of €10 per hour. At December 31, 2014, Bread Basket has paid €14,000 of salary expense. If Bread Basket fails to make the appropriate adjusting entry, which of the following is true regarding its December 31, 2014 statement of financial position?

Question

Quizplus · Accepted Answer

If Bread Basket fails to make the appropriate adjusting entry, the salary expense of €10 per hour for 2,400 hours worked during December 2014 (2,400 x €10 = €24,000) will be understated by €10,000 (€24,000 - €14,000 = €10,000), which means that liabilities are understated by €10,000.

Bread Basket Provides Baking Supplies to Restaurants and Grocery Stores