Question

QUESTION 6 Record the transaction below Shareholders' Equity The following events took place in the first month of business Assets Liabilities Common Stock Retained Earnings Paid cash at the end of the month to its employees for services performed during the current month TO RECEIVE CREDIT FOR THE QUESTION, AN ANSWER MUST BE SELECTED FOR EACH EVEN IF THERE IS NO EFFECT. IF THERE IS NO EFFECT, SELECT "O NO EFFECT." A. 500 Caslh B. (500) Cash Asset -Liabilities 500 Wage Expense D. O No Effect - Common Stock Retained Earnings ( 500) Wage Expense

Answer 1

Answer

• Cash is paid to employees, which is recorded as Wages Expenses.
• When Cash is paid for wages, Wages Expense will increase and Cash will decrease.
• Answers:

--Asset: Option B: $(500) Cash- Asset will decrease by the amount of Cash paid.

--Liabilities: Option D: $ 0 No effect. Liabilities remain unaffected by the transaction.
--Common Stock: Option D: $ 0 No effect. No element of transaction is affecting common stock.
--Retained Earnings: Option E: $ (500) Wages Expenses, which means that Retained earnings will decrease by the amount of Wages expense. This is because wages expense being an expense will reduce Net Income. Reduced net income will lead to reduced Retained earnings also.