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On Friday 3 July, the full $1,000 weekly wage is paid in cash, of which $400 was accrued at 30 June. What is the correct journal entry on 3 July?
ADebit Cash $1,000 received from employees; credit Wages Payable $1,000
BDebit Wages Expense $1,000 for the full week; credit Cash $1,000
CDebit Wages Payable $1,000 to clear the accrual; credit Cash $1,000
DDebit Wages Expense $600 and Wages Payable $400; credit Cash $1,000
Answer & Solution
Correct answer: D. Debit Wages Expense $600 and Wages Payable $400; credit Cash $1,000
1. Of the $\$1{,}000$ paid, $\$400$ was already recorded as Wages Payable in June.
2. The remaining $\$600$ relates to July work, so Wages Expense is debited $\$600$.
3. Wages Payable is debited $\$400$ to clear the liability, and Cash is credited $\$1{,}000$, so D is correct.
4. B ignores the prior accrual; C treats the whole amount as payable; A reverses the cash flow.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §2.5.1 "Wages—Accrued Expense", p.83_