Gordy's Corp.has seven employees.Each earns $800 per week for a five-day work week ending on Friday.This month,the last day of the month falls on a Thursday.The company should make an adjusting entry:

Question

Quizplus · Accepted Answer

The last day of the month falls on a Thursday, which means that the employees will only work four days in the final week of the month. Therefore, the company needs to adjust its accounts by recording the wages owed to the employees for the final day (Friday) that they did not work. The total amount owed to the seven employees for that day is $800 x 7 = $5,600. Since the company has not yet paid these wages, they should be recorded as a liability in the Wages Payable account. The adjusting entry to record this liability is to debit Wage Expense for the amount owed ($800 x 7 x 1 day/5 days = $1,120) and credit Wages Payable for the same amount. Therefore, the correct choice is A.