Pub Company's 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?

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Quizplus · Accepted Answer

The accrual at April 30 will mean that the employees will have worked for the entire week from Monday, April 22 to Friday, April 26, but they will not be paid until the following Tuesday, April 30. This means that the accrued payroll expense at April 30 will be $50,000 (for the week of April 22-26) and will not be paid until the following week. Therefore, this will decrease the Pub Company's net income by $50,000 for the week of April 22-26 and by $50,000 for the following week (May 1-3), resulting in a total decrease of $100,000 in net income.

Pub Company's Plant Operates Five Days Per Week with a Daily