Proctor Inc.has a weekly payroll of $8,000 for a five-day workweek,Monday through Friday.If December 31,the last day of the accounting year,falls on Wednesday,Proctor would make an adjustment that would
A)increase wages expense by $4,800.
B)decrease wages payable by $4,800.
C)decrease cash by $4,800.
D)increase wages payable by $8,000.

Question

Quizplus · Accepted Answer

December has 31 days, and since the payday is on Friday, December 26, there are two more days of work before the end of the accounting year. Therefore, the employees will have worked two days (December 29 and 30) without being paid, which means the wages expense needs to be adjusted upward by the amount of two days' wages, which is $8,000/5 x 2 = $3,200. Since this adjustment is made at the end of the accounting year, it is a "decrease" in wages payable since the company owes less money to its employees, but the effect on the income statement is an "increase" in wages expense by the same amount. Therefore, the correct answer is A.