O'Brien Pty Ltd pays salaries on Friday to cover the five working days including the Friday. The weekly wages bill is $100 000. If 30 June 2019 falls on a Monday, what will be the adjusting journal entry on 30 June 2019?

Question

Quizplus · Accepted Answer

Since the company pays salaries on Friday for the week including that Friday, and 30 June 2019 falls on a Monday, it means the wages for two days (the previous Thursday and Friday) have not been accounted for in the financial statements of the year ending 30 June 2019. The weekly wages bill is $100,000, so each day's wages are $20,000 ($100,000/5). For two days, this amounts to $40,000, but the correct entry to record the expense incurred but not yet paid (accrued) for these two days is to debit Wages Expense and credit Accrued Wages for the two days' wages, which is $40,000, not $20,000 as stated. Therefore, my initial selection was incorrect based on the provided calculation. The correct choice should reflect the accrual of two days' wages totaling $40,000.

O'Brien Pty Ltd Pays Salaries on Friday to Cover the Five