In its first year of operations,Jetway Airlines incurred and paid Salaries Expense of $40 million.On December 31,it accrued an additional Salaries Expense of $2 million.What should Jetway report in the income statement and balance sheet for its first year ended December 31?
A)Income statement: Salaries and Wages Expense $42 million;Balance sheet: Salaries and Wages Payable $2 million
B)Income statement: Salaries and Wages Expense $40 million;Balance sheet: Salaries and Wages Payable $2 million
C)Income statement: Salaries and Wages Expense $40 million;Balance sheet: Salaries and Wages Payable $0
D)Income statement: Salaries and Wages Payable $2 million;Balance sheet: Salaries and Wages Expense $42 million

Question

Quizplus · Accepted Answer

The expense recognition principle ("matching")is the practice under accrual basis accounting to record expenses in the same period as the revenues they generate,not necessarily the period in which cash is paid for them.Salaries and Wages Expense equals $42 million which includes the $40 million paid and the $2 million owed to employees.

In Its First Year of Operations,Jetway Airlines Incurred and Paid