Analyzing and Computing Accrued Wages Liability and Expense Demski Company pays its employees on the 1st and 15th of each month. It is March 31 and the company is preparing financial statements for this quarter. Its employees have earned $41,000 since the 15th of March and have not yet been paid.

How will Demskis balance sheet and income statement reflect the accrual of wages on March 31?

AnswerIncreaseDecrease wages payable by $Answer on the balance sheet. AnswerIncreaseDecrease wages expense by $Answer on the income statement.

Indicate the effect on the balance sheet and income statement accounts if Demski failed to make this accrual (for each account indicate whether it would be overstated or understated).

Liabilities	AnswerUnderstatedOverstated
Wages Expense	AnswerUnderstatedOverstated
Income	AnswerUnderstatedOverstated
Stockholders' Equity	AnswerUnderstatedOverstated