Any Accountants out there?

[JRSC00LUDE]

That would like to answer what is no doubt a pretty basic question on adjusting entries? Can't seem to get my head around one here.

PM me if interested, thanks.

[xtrader101]

Post it here and the beyonders will contribute all they can.

[JRSC00LUDE]

The given info. in a partial trial balance for year ending December 31, 2004 that relates to this question is:

Wages Payable 41,500 (DR)
Wages Expense 4,000 (DR)


The additional info. that adjusting entries must be made for is as follows:

The total payroll cost for the year 2004 was $50,000. At the end of last year, the company owed employees $4,000 for December wages and at December 31, 2004, the company owed employees $4,500 for December wages.

This is my first crack at adjusting entries, at the last question in the assignment. Can't get my head around it (first accounting class) but I assume it's pretty basic shit for those of you that have taken more than 6 weeks of accounting. :)

Pretty sure if someone tells me what needs to be done I'll be able to deconstuct it and understand WHY.

Thanks.

[icecreamvan]

<cue McKenzie>
<cue 3 other wannabes re-phrasing his answer and passing it off as their own>

or try:

Dr Wages Expense 46,000
Cr Wages Payable 46,000

Dr Wages Payable 83,000
Cr Cash 83,000



Who knows...


:dunno:

[clem24]

Ok without giving away the answer, I will try to give you a huge hint. The ending balances at 12/31/04 for each of those accounts, given the info, should be:

wages payable (4,500)
wages expense 50,000

Where positive = debit balance and neg = credit balance. With that info, you should be able to figure out your entries. Post if you are really stuck. BTW I assume wages payable is in a debit balance.

Another hint: to leave a good audit trail, you need 2 entries in total.

icecreamvan is incorrect.

[JRSC00LUDE]

I knew two entries would be required and I had the same outcome in mind (except the final wage expense would be $54,000.00, the additional 4000 being the expense of paying out the previous years wages payable). Also, I had both as DR balances as they were both given as DR amounts in the trial balance. Would the wage's payable have been zeroed out in the closing entries for the previous year and that value is just there as a trick? We aren't taking closing entries, just getting familiar with finanical reports and then moving on to management accounting.

I'm really not good at accounting, curse those mandatory classes.....

[Enhance]

Confusing question. Because adjusting entries never deal with the cash account, where are you putting the 41500 worth of wages payable?

[JRSC00LUDE]

^

Bingo, you can't adjust cash so what the hell is the other side of the entry? :banghead:

[clem24]

Ok, looks like you might be stuck here.

The ending bal in wages payable is wrong. Think this. The wages payable sitting in your current trial balance have been paid out. That's why it's in a debit balance. Otherwise, i'd still be a credit. So here we go.

First entry: clear out that payable acct into the wages expense. So...

dr wage expense 41,500
cr wage payable 41,500

Now your payable is clear.

2nd entry: book the wages payable.

dr wages expense 4,500
cr wage payable 4,500

Now look at your ending balance.

Wage expense: 4,000 + 41,500 + 4,500 = $50,000
Wage payable: 41,500 - 41,500 - 4,500 = $(4,500)

Presto.

I don't mind giving the answer, as long as you know/understand why this is done the way it is.

[icecreamvan]

Aww shucks...sorry I misled you.:(

[Enhance]

The entry to put something into wages payable is..
dr wages expense x
cr wages payable x


...so your first entry is backwards.. and the cr will be to the wrong account

[clem24]

Originally posted by Enhance
The entry to put something into wages payable is..
dr wages expense x
cr wages payable x


...so your first entry is backwards.. and the cr will be to the wrong account

That's right. That is how you would record more wages payable... But look at the opening balance in that acct. Wages payable is a liability (a CREDIT) but in a DEBIT balance. To zero out that account, wages payable needs to be credited.

[Enhance]

Wages Payable 41,500 (DR)


Originally posted by clem24


But look at the opening balance in that acct. Wages payable is a liability (a CREDIT) but in a DEBIT balance. To zero out that account, wages payable needs to be credited.

Genius... I need to learn how to read ;(

[z1_bam]

Not to be picky but if it is an assignment they will probably want you to separate out the bookkeeping error and the reversal of the prior year payable.

so first you could reverse the prior year payable:

Dr wage payable 4000
Cr wage exp 4000

then fix the bookkeeping error

Dr wage expense 45,500
Cr wage payable 45,500

setting up the current year payable is the same as above

[JRSC00LUDE]

Appreciate the help guys, tomorrow I'm going to do a couple of extra questions just to be sure I understand why I'm doing that but it seems pretty clear after looking at it from the point of view of clearing out the payable account first. I just didn't look at it that way and was getting confused by numbers but now it seems pretty easy.....:dunno:

Thank you Clem!

[clem24]

Yup.. that's right too, you'd need to state your assumptions that that is the accounting error. The acct'g error could also have been that they correctly reversed the prior year payable but fucked up elsewhere.

[Mckenzie]

Sorry didnt see this thread :angel:

Post again if you need some help....gotta challenge the neurons upstairs from time to time.

[JRSC00LUDE]

^

Will do if need be, thank you!