A company owes workers 3000 in wages

Asked by wiki @ 07/11/2020 in Business viewed by 436 People

A company owes workers $3,000 in wages for hours worked in March. In April, the company writes a check for the wages. Using the accrual basis, what entry does the company make in March?

Answered by wiki @ 07/11/2020

Answer:

The correct option is E.

Explanation:

The options attached to the question are as follows:

A. Debit Cash with $3,000 and credit accrued wage payable with $3,000.

B. Debit wage expenses with $3,000 and credit cash with $3,000.

C. Debit accrued wage payable with $3,000 and credit wage expenses with $3000.

D. Debit cash with $3,000 and credit wage expenses with $3,000.

E. Debit wage expenses with $3,000 and credit accrued wage payable with $3,000.

The accrued wage accounting principle operates on the basis that wages have been earned by the employees, but the wages have not been paid. To record an unpaid wages in the accrual adjusting entry, the wage expenses will be debited while the accrued wage payable will be credited with the amount of the wages.

In the scenario given in the question, note that the wages for the workers was paid in April, so in March, (when the wages was not yet paid) the entry that the company will make is to debit wage expenses and credit accrued wage payable, thus, option E is correct.

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