Question

Look Builders pays its workers every two weeks. As of December 31 of Year 1, workers have earned wages of $9,000 for which they have not yet been paid; they will not be paid these wages until January of next year. The correct adjusting entry was made on December 31. On January 5 of Year 2, Look Builders paid total wages to the employees of $13,000. Of the $13,000 paid, $9,000 related to work performed last year.

Which one of the following is included in the journal entry necessary on January 5 of Year 2 to record the payment of $13,000 in cash?

A DEBIT Wage Expense $4,000.

A DEBIT Wage Expense $13,000.

A DEBIT Wages Payable $4,000.

A DEBIT Wage Expense $9,000.

A CREDIT Wages Payable $9,000.

Answer 1

Wages payable on December 31, year 1 = $9,000

Total wages paid on January 5, year 2 = $13,000

Wages expense related to year 2 = Total wages paid on January 5, year 2- Wages payable on December 31, year 1

= 13,000-9,000

= $4,000

On January 5, year 2, the following journal entry will be made:

Date	General Journal	Debit	Credit
January 5, Year 2	Wages payable	$9,000
	Wages expense	$4,000
	Cash		$13,000
	( To record wages payment)

First option is correct.