ACCOUNTING CRASH COURSE EXAM FROM WALL STREET PREP PREMIMUM PACKAGE ACTUAL 2024 EXAM

Since wages were earned in 2017 but not yet paid, the opening balance sheet in 2018 would have an accrued wages liability of $2.0. These were paid in 2018, reversing the liability. However, since there is only $5.0 million in cash ($7.0 less the $2.0 million used to pay 2017 wages) available to pay wages earned in 2018, that leaves $3.0 million in earned wages unpaid, raising the accrued wages liability to $3.0 million. The net impact to the liability is $1.0 million (-$2.0 + $3 million). The only asset impacted is cash, which decreases by $7.0 million, while retained earnings decreases by $8.0 million, since wages are expensed when they are earned, not when they are paid. See Lesson: Payable, Accrued Expenses, Deferred Revenue & Debt Financial Statements to Evaluate a Company (4) - Answer- Balance Sheet, Cash Flow Statement, Income Statement, Statement of Shareholder's Equity (Rare) 4 Statements Publishing - Answer- Published in periodic and annual filings for companies, often accompanied with financial footnotes and management discussion & analysis (MD&A) Fundamental Accounting Equation - Answer- Assets = Liabilities + Shareholders' Equity