Analyzing and Computing Accrued Wages Liability and Expense Demski Company pays

Question

Analyzing and Computing Accrued Wages Liability and Expense

Demski Company pays its employees on the 1st and 15th of each month. It is March 31 and Demski is preparing financial statements for this quarter.Its employees have earned $96,000 since the 15th of March and have not yet been paid. How will Demski's balance sheet and income statement reflect the accrual of wages on March 31? What balance sheet and income statement accounts would be incorrectly reported if Demski failed to make this accrual (for each account indicate whether it would be overstated or understated)?

Explanation / Answer

Increase wages payable by $96000 on the balance sheet. Increase wages expense by $96000 on the income sheet. Liabilities Understated Wages Expense Understated Income Overstated Stockholders' Equity Overstated

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