Question

Away and Close Vacationers Inc has ten employees. The employees only work Monday through Friday. The fiscal year of the company ends on April 30. Employees are paid on the Friday one week after the end of the pay period. For the pay period from Monday, April 28, 2014 to Friday, May 9, 2014, the total employee wages amounted to $20,000 and it was accrued evenly for the ten workdays. The employees will be paid on Friday, May 16, 2014.

How much in total will the employees be paid on Friday, May 16, 2014?

How much of the wages expense relates to fiscal year ended April 30, 2014?

How much of the wages expense relates to the fiscal year starting on May 1, 2014?

What journal entry should be recorded on April 30, 2014, if any?

What journal entry should be recorded on the pay day, May 16, 2014?

Answer 1

Solution:

10 Days Wages    =    $20000

As per question wages was evenly paid over the period of 10 Days

Per Day wages    = $20000/10

                              = $2000 Per day

1) As per question Away and Close Vacationers Inc pay wages one week after the pay period, hence wages payable on Friday, May 16, 2014 will be wages of last week ends on Friday, May 9, 2014, ( 5 Days wages)

= Per Day wages x 5

= $2000 x 5

= $10000

2) Calculation of Wages Expense rated to fiscal year ended April 30, 2014:

No of days for which wages payable pending for the year ended April 30, 2014 = 3 days

Wages Expense = No of days wages payable pending for the year ended April 30, 2014   

                                     x Per Day wages                                                                         

= 3 Days x $ 2000

= $6000

3)  Calculation of Wages Expenses rated to fiscal year starting on May 1, 2014

= Total Wages Expenses - Wages Expenses rated to fiscal year ended April 30, 2014

= $20000 - $6000 = $14000

Journal Entries
				$	$
30.04.2014	Wages Expenses A/c	…..Dr		6,000.00
	To Wages Expenses Payable A/c				6,000.00
	(Being Wages Expenses Due for 28-30 April 2014)
16.05.2014	Wages Expenses Payable A/c	…..Dr		10000.00
	To Bank A/c				10000.00
	(Being Wages Expenses paid for the week ended May 9, 2014)