Jogg Corp.plant operates five days per week with a daily payroll of $50,000.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 Pub's net income?

Question

Quizplus · Accepted Answer

Since the last day of the month (April 30) falls on a Tuesday, the company would have to accrue one day's worth of payroll expenses for that week (April 29-30) as the payment for this week won't be made until the following Tuesday (May 7). This means that the accrual for April 30 would be $10,000 ($50,000 x 1/5). This accrual would decrease the net income for the month of April by $10,000 x 10 (number of employees) = $100,000. Therefore, the correct answer is C, decrease by $100,000.

Jogg CorpPlant Operates Five Days Per Week with a Daily Payroll