Wages of $30 000 were paid in June for work done in June; $5000 of wages were owing at the end of June for work done in June; and an invoice for $8000 was received for June advertising expense to be paid in July. What are total expenses for June?

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BlackTom AI · Accepted Answer

To determine June's total expenses, we must apply accrual accounting principles, recognizing expenses when incurred regardless of when cash is paid.

First, wages paid in June for work done in June amount to $30,000. This is an expense for June, so it contributes $30,000 to June's expenses.

Second, there were wages of $5,000 owing at the end of June for work performed in June. Since the work was done in June, the expense should be recognized in June as well, adding $5,000 to the total.

Third, there is an advertising expense of $8,000 for June that will be paid in July (an invoice received in June but not yet paid). Under accrual accounting, this should also be recorded as an expense in June, even though cash will be paid in July, adding another $8,000 to June's expenses.

Summing these components: $30,000 (paid wages) + $5,000 (wages owing) + $8,000 (advertising incurred in June) = $43,000.

Now, consider why the other options are incorrect:
- Option A: $30,000 only accounts for the wages that were paid, ignoring the wages still owed at period end and the advertising incurred in June. This understates June expenses.
- Option B: $35,000 combines the paid wages ($30,000) with the owing wages ($5,000) but still omits the June advertising expense ($8,000). This understates June expenses.
- Option D: $38,000 suggests adding only $8,000 of advertising to the $30,000 paid wages, or alternatively adding some but not all components; it ignores the $5,000 of wages owed, leading to an incorrect total.

In summary, the correct accrual-based total for June expenses should include all amounts incurred in June, regardless of when cash is paid, which yields $43,000 when summing the three components described above.

Dashboard Unit 2 Non assessable multiple choice questions quiz

Wages of $30 000 were paid in June for work done in June; $5000 of wages were owing at the end of June for work done in June; and an invoice for $8000 was received for June advertising expense to be paid in July. What are total expenses for June?

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