Question

1- Greenspan Automotive pays its employees $1,500 per day and paydays are every Friday. Greenspan Automotive’s employees work Monday through Friday. Assume the last day of the fiscal period falls on Wednesday, the adjustment for accrued wages would be recorded in the work sheet as a:

a-credit to Wages Payable, $1,500.

b-debit to Wages Expense, $4,500.

c-debit to Wages Expense, $3,000.

d-credit to Cash, $3,000.

2- The adjusting entry to record depreciation of a building is

a-debit Accumulated Depreciation-Building, credit Depreciation Expense-Building.

b-debit Depreciation Expense-Building, credit Accumulated Depreciation-Building.

c-debit Building, credit Accumulated Depreciation-Building.

d-debit Depreciation Expense-Building, credit Depreciation Payable.

Answer 1

1) Answer: b) Debit to Wages expense, $4,500

Explanation:

Since last day of the fiscal period falls on wednesday, payment for work done from monday to wednesday will be paid in the next fiscal period.However, the expense incurred by company in the current fiscal period as wages should be recognised in the current period itself

Therefore, an adjusting entry is to be done to record the wages expense incurred for 3 days (Monday,Tuesday,Wednesday) by debiting wages expense and crediting wages payable.

Wage rate = $1,500 per day

Wages accrued for 3 days = $1500 * 3 days

= $4,500

The Journal entry to record the accrued wages expense will be :

Wages Expense 4,500

Wages Payable 4,500

2) Answer: b) Debit Depreciation Expense-Building, credit Accumulated Depreciation-Building

Explanation:

The adjusting entry to record depreciation is done by debiting Depreciation Expense-Building and crediting Accumulated depreciation-Building.

Journal entry to record depreciation for Building is:

Depreciation expense-Building XXX

Accumulated Depreciation-Building XXX