In Its First Year of Operation,Jetway Airlines Paid Salaries Expense

question 102

Multiple Choice

In its first year of operation,Jetway Airlines paid Salaries expense of $40 million.On December 31,it accrued an additional Salaries expense of $2 million.What should Jetway report in the income statement and balance sheet for its first year ended December 31?

• A) Income statement: Salaries and Wages Expense $42 million; Balance sheet: Salaries and Wages Payable $2 million
• B) Income statement: Salaries and Wages Expense $40 million; Balance sheet: Salaries and Wages Payable $2 million
• C) Income statement: Salaries and Wages Expense $40 million; Balance sheet: Salaries and Wages Payable $0
• D) Income statement: Salaries and Wages Payable $2 million; Balance sheet: Salaries and Wages Expense $42 million

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Definitions:

Control Over Work

The authority to direct and manage how a job or task is executed.

IRS Determination

An official decision made by the Internal Revenue Service on a specific tax matter.

Principal-Agent Relationship

A legal relationship where one party (the agent) acts on behalf of another party (the principal) in business transactions.

Power to Bind

The authority granted to an agent or representative to enter into contracts or agreements that legally bind the principal to the terms.