A company pays wages every two weeks.Wages amount to $100 a day.On March 31,the company pays wages for the two weeks ending March 24.At the end of the month,the related adjusting journal entry will include a
A)debit to Retained Earnings for $700 and a credit to Cash for $700.
B)debit to Wage Expense for $700 and a credit to Wages Payable for $700.
C)debit to Wages Payable for $700 and a credit to Cash for $700.
D)debit to Retained Earnings for $700 and a credit to Wages Payable for $700.

Question

Quizplus · Accepted Answer

The adjusting entry at the end of the month should reflect the amount of wages that have been earned but not yet paid as of the end of the accounting period. Since the wages for the two weeks ending March 24 have already been paid, there should be no credit to cash. Instead, there should be a debit to Wage Expense for the total amount of wages earned during the two weeks ending March 24 ($1,400) and a credit to Wages Payable for the same amount since the wages have been earned but not yet paid. This means that the company owes its employees $700 for wages earned during the second week of March, which will be paid out on the next pay period.

A Company Pays Wages Every Two Weeks