question archive Adjusting and subsequent cash entries for accrued expenses IKEO is a store with trendy and affordable furniture
Adjusting and subsequent cash entries for accrued expenses IKEO is a store with trendy and affordable furniture
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Adjusting and subsequent cash entries for accrued expenses
IKEO is a store with trendy and affordable furniture. IKEO has five part-time employees, each of whom earns $280 per day. They are normally paid on Fridays for work completed on Monday through Friday of the same week. They were all paid in full on Friday, December 26, 2017. The next week, all five of the employees worked only four days because New Year's Day was an unpaid holiday. Show the adjusting entry that would be recorded on Wednesday. December 31 2017 IKEO's year end and the journal entry that would be made to record paying the employees wages on Friday, january 2,2018.
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- All working forms part of the answer
|
Till December 26, 2018 |
$ 7,000 [5 employees x $ 280 per day x 5 days] |
Paid on Friday Dec 26, 2018 |
|
Dec 27, 2018 [Saturday] |
Holiday: No Salaries payable |
No payment required |
|
Dec 28, 2018 [Sunday] |
Holiday: No Salaries payable |
No payment required |
|
Dec 29, 2018 [Monday] |
$ 1,400 [5 employees x $ 280 per day] |
Payable on Friday 2 Jan 2019 |
|
Dec 30, 2018 [Tuesday] |
$ 1,400 [5 employees x $ 280 per day] |
Payable on Friday 2 Jan 2019 |
|
Dec 31, 2018 [Wednesday] |
$ 1,400 [5 employees x $ 280 per day] |
Payable on Friday 2 Jan 2019 |
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Total Wages for the accounting period ending 31 Dec 2018 = $ 1400 + 1400 + 1400 = $ 4,200. This $ 4,200 is not paid, but accrued to be paid next Friday which falls in new accounting period. |
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NEXT ACCOUNTING PERIOD: YEAR 2017 |
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1 Jan 2019 [Thursday] |
Holiday: No Salaries payable |
No payment required |
|
2 Jan 2019 [Friday] |
$ 1,400 [5 employees x $ 280 per day] |
Payable on Friday 2 Jan 2019 |
|
Till 2 Jan 2019 [Friday] |
$ 4,200 for 2018 PLUS $ 1,400 for 2019 = $ 5,600 |
Paid on Friday 2, 2019 = $ 5,600 |
- Journal Entries based on above:
---Adjusting Entry on 31 Dec:
Wages expenses for 2018’s unpaid period amounts to $ 4,200 (calculated above) are to be recorded as accrued expenses:
|
Date |
Accounts title |
Debit |
Credit |
|
31-Dec-18 |
Salaries & Wages expenses |
$ 4,200.00 |
|
|
Salaries & Wages Payable |
$ 4,200.00 |
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|
(wages expenses for 3 days of 2018 accrued) |
---Entry to be recorded on 2 Jan 2018 in the next accounting period for payment:
|
Date |
Accounts title |
Debit |
Credit |
|
02-Jan-19 |
Salaries & Wages expenses |
$ 1,400.00 |
|
|
Salaries & Wages Payable |
$ 4,200.00 |
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|
Cash |
$ 5,600.00 |
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(Cash paid for 4 days wages, including wages accrued for 2018) |
