The employees of Dew Drop Inn get paid every Friday for a 5-day work week (Monday through Friday).The total payroll is $5,000 per day of work.If the accounting period ends on Wednesday of a given week,and the proper adjustment is made on Wednesday,what will be the effect of the adjustment on the company's financial statements?
A)The balance sheet will report Salaries payable of $25,000.
B)The income statement will report additional salaries expense of $25,000.
C)The balance sheet will report Salaries payable of $15,000.
D)The income statement will report Salaries payable of $15,000.

Question

Quizplus · Accepted Answer

Since the accounting period ends on Wednesday, the employees have only worked for 3 days out of 5. Therefore, the total payroll for those 3 days is $15,000 ($5,000 per day x 3 days). This means that the adjustment made on Wednesday will create a Salaries Payable account in the amount of $15,000, which will be reported on the balance sheet. The income statement will not be affected as no additional salaries expense has been incurred beyond the $15,000.

The Employees of Dew Drop Inn Get Paid Every Friday