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Wyatt Company Paid $57,000 in January,Year 2 for Salaries That

Question 54

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Wyatt Company paid $57,000 in January,Year 2 for salaries that had been earned by employees in December,Year 1.Indicate whether each of the following statements about financial statement effects of the January,Year 2 event is true or false.

Premises:

Responses:

Payment of the salaries in Year 2 increased a liability.

True

Both assets and equity decreased in Year 2 as a result of this transaction.

False

The Year 2 statement of changes in stockholders' equity would not be affected because the salaries expense had been recognized at the end of December,Year 1.

Cash flows from operating activities decreased on the Year 2 statement of cash flows.

The income statement for Year 2 is not affected because the salaries expense had been recognized at the end of December,Year 1.

Premises:

Payment of the salaries in Year 2 increased a liability.

Both assets and equity decreased in Year 2 as a result of this transaction.

The Year 2 statement of changes in stockholders' equity would not be affected because the salaries expense had been recognized at the end of December,Year 1.

Cash flows from operating activities decreased on the Year 2 statement of cash flows.

The income statement for Year 2 is not affected because the salaries expense had been recognized at the end of December,Year 1.

Responses:

True

False

Correct Answer:

Premises:

Responses:

Payment of the salaries in Year 2 increased a liability.

Both assets and equity decreased in Year 2 as a result of this transaction.

The Year 2 statement of changes in stockholders' equity would not be affected because the salaries expense had been recognized at the end of December,Year 1.

Cash flows from operating activities decreased on the Year 2 statement of cash flows.

The income statement for Year 2 is not affected because the salaries expense had been recognized at the end of December,Year 1.

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