Hahn Corp.has three employees.Each earns $600 per week for a five-day workweek ending on Friday.This month the last day of the month falls on a Wednesday.The company should make an adjusting entry:
A)Debiting Wage Expense for $1,080 and crediting Wages Payable for $1,080.
B)Debiting Wage Expense for $360 and crediting Wages Payable for $360.
C)Crediting Wage Expense for $1,080 and debiting Wages Payable for $1,080.
D)Crediting Wage Expense for $360 and debiting Wages Payable for $360.

Question

Quizplus · Accepted Answer

Since the last day of the month falls on a Wednesday, two days of work (Thursday and Friday) will be in the next pay period. Therefore, the company needs to recognize the wages earned by the employees in the current period but not paid until the next period. The adjusting entry should debit Wage Expense for the amount earned by the employees for three days ($600/day x 3 days x 3 employees = $5,400) and credit Wages Payable for the same amount ($5,400). Therefore, the correct choice is A.

Hahn CorpHas Three Employees