Jannet Company, currently pays its employees at the end of a week. The weekly payroll totals $400,000. If it were to extend the pay period so as to pay its employees 1 week later throughout an entire year, the employees would in effect be lending the firm ________ for a year.
A) $400,000
B) $20,800,000
C) $4,800,000
D) $675,000

Question

Quizplus · Accepted Answer

By extending the pay period to pay its employees 1 week later throughout an entire year, the firm retains an additional $400,000 that it would otherwise pay out each week. This means at any given time during the year, the firm is holding onto an extra $400,000 that it would have paid to employees, effectively being lent this amount by the employees for the year. The total does not accumulate week over week because each week's delay is simply shifting the same $400,000 payment by one week throughout the entire year.

Jannet Company, Currently Pays Its Employees at the End of a Week