Sampson Ltd.'s employees perform work to the value of $6500. They are paid $3500 immediately with the balance to be settled in the next accounting period. Under the cash approach to profit measurement, the amount of wages expense that will be recorded in the current period is:
A) $3000.
B) $3500.
C) $6500.
D) Nil.

Question

Quizplus · Accepted Answer

Under the cash approach to profit measurement, expenses are recognized when they are paid in cash. Since $3500 out of the total $6500 wages have been paid in the current period, only the amount paid i.e. $3500 will be recognized as expenses in the current period. Therefore, the correct choice is (B) $3500.