Accrued Expenses

Concept #1: Adjusting Journal Entries: Accrued Expenses

Practice: Wait-2-Pay, Inc. has an employee that works every day of the year for $100 per day. W2P pays its employee once per month on the 25th of the month. The company is preparing its December 31 financial statements. The entry to adjust for accrued salary expense would include:

Accrued Expenses occur when we receive the benefits of an expense, but have not paid for the expense yet. The account titles for Accrued Expenses can be written two ways. As an example, let's use wages earned by an employee, but not paid yet. This account could be written as "Accrued Wage Expense" or "Wages Payable." Both are correct!

Additional Problems
Bella Company had wages payable at the beginning of the year of $1,000.  During the year her company paid cash wages of $25,000 and at the end of the year she owed wages of $ 3,000.  Her income statement for the year will show wage expense of: A) $ 24,000 B) $ 25,000 C) $ 27,000 D) $ 28,000 E) $ 26,000
Employees are paid $2,400 on every Friday for a five-day workweek. The accounting period ends on Wednesday, December 31. Adjusting for the salaries and benefits expense for the last three days of the accounting period would: A) increase a deferred expense. B) increase an accrued expense. C) decrease a deferred expense. D) decrease an accrued expense.
Which of the following is NOT an operating expense? A) Salaries and Benefits expense B) Rent expense C) Interest expense D) Depreciation expense
The estimated time of accrued vacation time for employees is $63,500 for the period. The required adjusting entry will include a: A) debit to Compensation Expense and a credit to Cash for $63,500. B) debit to Accrued Vacation Liability and a credit to Cash for $63,500. C) debit to Compensation Expense and a credit to Accrued Vacation Liability for $63,500. D) debit to Compensation Expense and a credit to Accounts Payable for $63,500.
On May 31, Liquid Company needed cash and borrowed $48,000 for 90 days at 6% interest. The adjusting entry necessary when preparing the June 30 financial statement would include: a) a credit to Cash for $240 b) a debit to Interest Expense for $240 c) a debit to Interest Payable for $240 d) a credit to Interest Expense for $240
Jan earned wages of $650 for the last week of April. Her next payday is on May 1. The adjusting entry for Jan's employer on April 30 includes: a) a credit to Wage Expense for $650 b) a credit to Cash for $650 c) a credit to Wages Payable for $650 d) No entry required
Failure to record the receipt of a utility bill for services already received will result in: a. An overstatement of assets. b. An overstatement of liabilities. c. An overstatement of equity. d. An understatement of assets.
Of the following adjusting entries, which one results in an increase in liabilities and the recognition of an expense at the end of an accounting period? a. The entry to record interest accrued on a note payable. b. The entry to record revenue earned but not yet collected or recorded. c. The entry to record earned portion of rent previously received in advance from a tenant. d. The entry to record the portion of unexpired insurance used.
The financial statements for ABC Company are prepared on July 31, 2013 based on an accrual accounting basis. No interest for July has been paid for the monies borrowed under the three year promissory note signed on 1/1/13. The interest is due monthly based on the principal balance of $10,000 and an annual interest rate of 6%. How should ABC account for the monthly interest? a. Debit interest receivable and credit interest payable in the amount of $600 for each account. b. Debit interest expense and credit interest payable in the amount of $50 for each account. c. Do not record at this time. Record the interest when the bank sends the bill. d. Debit interest payable and credit interest expense in the amount of $50 for each account.
In Year 2, Greenleaf Company records the payment of $400 cash for an expense accrued in Year 1 and records the accrual of $225 for another expense. The impact of these two entries on Year 2 total expenses and liabilities is:      Total Expenses        Liabilities a) Increase by $625 Decrease by $225 b) Increase by $625 Decrease by $625 c) Increase by $225 Decrease by $625 d) Increase by $225 Decrease by $175 e) Decrease by $175 Decrease by $175
The employees of Fashion Backwards work a Monday through Friday workweek with no holidays. Every other Friday, the company pays its employees a total of $32,000. The next pay date will occur on Friday, January 3. Fashion Backwards is currently preparing its financial statements for the year-ended December 31. What adjusting entry is necessary to record accrued salaries at the end of December? a) Debit Salaries Expense $22,400; Debit Prepaid Salaries $9,600; Credit Salaries Payable $32,000 b) Debit Salaries Expense $6,400; Credit Salaries Payable $6,400 c) Debit Prepaid Salaries $9,600; Credit Salaries Payable $9,600 d) Debit Salaries Expense $22,400; Credit Salaries Payable $22,400
On October 1, 2009, Ethan Company borrowed $20,000 on a 6-month note with an annual interest rate of 10 percent. How much interest expense should be reported for the year ended December 31, 2009?  A. $ 333. B. $ 500. C. $ 2,000. D. $ 0.
XYZ Company received a $215 bill for electricity for the month of September on September 30. The bill will be paid on its due date of October 10. The journal entry made by XYZ Company at September 30 would be: A. debit utilities expense $215 and credit utilities payable $215 B. debit utilities payable $215 and credit cash $215 C. debit utilities payable $215 and credit utilities expense $215 D. debit utilities expense $215 and credit cash $215 E. debit utilities expense $215 and credit prepaid utilities $215 F. XYZ Company would not make a journal entry on September 30 related to this transaction
Failure to make a necessary adjusting entry for accrued interest on a note payable would cause A. an understatement of liabilities and stockholders' equity. B. net income to be overstated and assets to be understated. C. net income to be understated and liabilities to be understated. D. an overstatement of net income, an understatement of liabilities, and an overstatement of stockholders' equity.
Gross wages of $20,000 accrued but not paid to employees at the end of 2010 should be recorded by the employer in a journal entry that includes a A. debit of $20,000 to Compensation payable. B. credit of $20,000 to Cash. C. debit of $20,000 to Compensation expense. D. debit of $20,000 to Cash.