Bread Basket provides baking supplies to restaurants and grocery stores.During December 2011, Bread Basket's employees worked 2,400 hours at an average rate of €10 per hour.At December 31, 2011, Bread Basket has paid €11,000 of salary expense.If Bread Basket fails to make the appropriate adjusting entry, which of the following is true regarding its December 31, 2011 statement of financial position?

Question

Quizplus · Accepted Answer

Bread Basket's total salary expense for December is €24,000 (2,400 hours x €10/hour). Since only €11,000 has been paid, €13,000 remains unpaid and should be recorded as a liability. If not adjusted, liabilities are understated by €13,000.

Bread Basket Provides Baking Supplies to Restaurants and Grocery Stores