Question

Exercise 8-40
Accrued Wages and Payment of Payroll

GCD Advisors offices are open Monday through Friday and GCD pays employees salaries of $50,000 every other Friday. During the current year December 31 falls on a Thursday and the next payday is January 8.

Given this information, determine the adjusting journal entry that GCD must make on December 31 as well as the journal entry to record the payment of the payroll on January 8. If an amount box does not require an entry, leave it either blank or enter "0".

Dec. 31

(Record accrued wages) Jan. 8 (Record payment of wages)

Answer 1

• All working forms part of the answer
• Payment is made on Friday, but year ending on Thursday, hence, salaries of mon, tues, wed and Thursday are accrued but not paid.
• Working:

Date	Day	Per Day Salary	Salary Wages Expenses
28-Dec	Monday	$          10,000.00
29-Dec	Tuesday	$          10,000.00
30-Dec	Wednesday	$          10,000.00
31-Dec	Thursday	$          10,000.00	$                 40,000.00 [Accrued on 31 Dec]
01-Jan	Friday	$          10,000.00
02-Jan	Saturday	$                         -
03-Jan	Sunday	$                         -
04-Jan	Monday	$          10,000.00
05-Jan	Tuesday	$          10,000.00
06-Jan	Wednesday	$          10,000.00
07-Jan	Thursday	$          10,000.00
08-Jan	Friday	$          10,000.00	$                 50,000.00 [5 days salaries for Jan 1st week]
	Total paid in cash		$                 90,000.00

• Journal Entries would be:

Date	Accounts title	Debit	Credit
31-Dec	Salaries (Wages) Expenses	$          40,000.00
	Salaries (and wages) Payable		$                 40,000.00
	(accrued wages for last 4 days of year)
08-Jan	Salaries (Wages) Expenses	$          50,000.00
	Salaries (and wages) Payable	$          40,000.00
	Cash		$                 90,000.00
	(accrued wages paid including payment for 1st week of Jan)