Question

A manufacturing company's weekly payroll is $800,000 for a 5-day work week beginning each Monday and ending each Friday. The last time salaries and wages were recorded was Friday, December 26. What adjustment is needed on December 31, the last day of the company's fiscal period?

The answer is: Increase Wages Expense by $480,000 but I'm unsure how you get the number $480,000?

Answer 1

First, we shall find the Daily Payroll of the company.

Given, Company's weekly payroll = $800,000

Also given, that is for a 5 - day work beginning each Monday and ending each Friday.

Therefore, daily payroll = $800,000 ÷ 5 = $160,000

Now , we shall find the amount to be adjusted.

Given, the last day of recording the salaries and wages were 26th December and the books of accounts closes on 31st December.

So , we must add the amount of wages and salaries for that period of 5 days.

Given, 26th December is a Friday. So the last five days would respectively be Saturday, Sunday, Monday, Tuesday, Wednesday.

We know that the work is only in 5 days of the week and the days starts from Monday to Friday. So here, we only have to pay the wages and salaries for that 3 days.

We know , the daily payroll = $160,000

Amount to be added to the Wages Expense

= 3 days * daily payroll

= 3 * $ 160,000

= $480,000

Thus the answer is :

  Increase Wages Expense by $480,000