The Employees of Dew Drop Inn Get Paid Every Friday

question 54

Multiple Choice

The employees of Dew Drop Inn get paid every Friday for a 5-day workweek (Monday through Friday) .The total payroll is $5,000 per day of work.If the accounting period ends on Wednesday of a given week,what adjustment must be made to the company's accounting records?

• A)Increase Salaries payable by $15,000 and increase shareholders' equity by recognizing Salaries expense for the same amount.
• B)Increase Salaries payable by $15,000 and decrease shareholders' equity by recognizing Salaries expense for the same amount.
• C)Decrease Cash by $15,000 and decrease shareholders' equity by recognizing Salaries expense for the same amount.
• D)No adjustment is necessary because there is no expense until the employees are paid on Friday.

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Definitions:

Predetermined Overhead Rate

A rate calculated before the accounting period begins, used to allocate overhead costs to products or job orders based on a chosen activity base.

Direct Labor-Hours

The total hours worked by employees directly involved in the production of goods or provision of services.

Manufacturing Overhead

Any production expenses beyond direct labor and materials, which include overheads like equipment wear and tear, utilities, and rental fees.

Manufacturing Overhead

All indirect costs associated with the manufacturing process, including utilities, maintenance, and salaries of managers.