[kmir]

Hi, I'm wondering what I did wrong on this question.

Brian Strongford owns a medium-sized Thai restaurant called Chada New. Most of his business is from customers who enjoy in-restaurant lunches and dinners and pay before they leave. He also provides catered food for functions outside of the restaurant. Because he needs to prepare the food in large quantities and transport it to the venue, he requires these customers to make a 40% deposit at the time of booking the event. The remaining 60% is due on the day of the function.

During 2008, the restaurant took in $906,415 from restaurant and catered sales. At year end, December 31, 2008, $15,678 of the catered sales amount was for a convention that was scheduled for January 12, 2009. Brian paid $248,010 for food supplies during the year and $358,572 for wages for the chefs and other restaurant staff. The restaurant owed $8,580 in wages to its staff at year end. This would be paid on January 4, 2009, as part of the normal bi-weekly pay schedule.

Prepare as much of the income statement for Chada New as you can, showing the amount of sales and any other amounts that should be included.


Total Revenues = 906415-15678 = 890737
Total Expense = 358572+248010 = 606582
Net Income = 890737-606582 = 284155


Am I correct in omitting the $8580 wages owed to the employee from the wage expense in the income statement?

[pready]

No, the journal entry for the wages owed is:
Debit Wages Expense for the amount
Credit Wages Payable for the amount

Therefore you need to increase your wages expense to include wages that have not been paid.