Question

In: Accounting

Sheridan Company began operations on January 2, 2016. It employs  8 individuals who work 8-hour days and...

Sheridan Company began operations on January 2, 2016. It employs  8 individuals who work 8-hour days and are paid hourly. Each employee earns  10 paid vacation days and  8 paid sick days annually. Vacation days may be taken after January 15 of the year following the year in which they are earned. Sick days may be taken as soon as they are earned; unused sick days accumulate. Additional information is as follows.

Actual Hourly
Wage Rate

Vacation Days Used
by Each Employee

Sick Days Used
by Each Employee

2016

2017

2016

2017

2016

2017

$ 8 $ 9 0 9 6 7


Sheridan Company has chosen to accrue the cost of compensated absences at rates of pay in effect during the period when earned and to accrue sick pay when earned.

Prepare journal entries to record transactions related to compensated absences during 2016 and 2017. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date

Account Titles and Explanation

Debit

Credit

2016

(To accrue the expense and liability for vacations)

(To accrue the expense and liability for sick pay)

(To record payment for compensated time when used by employees)

2017

(To accrue the expense and liability for vacations)

(To accrue the expense and liability for sick pay)

(To record vacation time paid)

(To record sick leave paid)

Compute the amounts of any liability for compensated absences that should be reported on the balance sheet at December 31, 2016 and 2017.

2016

2017

Vacation Wages Payable $ $
Sick Pay Wages Payable $ $

Solutions

Expert Solution

For example, (10*8*12*12) it means 10 employee, 8 hours, $12 wages rate per hour*12 days

Journal entries

Date

General journal

Debit

Credit

2016

Salaries and wages expense (8*8*8*10)

         5,120

Salaries and wages payable

         5,120

(To record expense and liabilities for vacation.)

2016

Salaries and wages expense (8*8*8*8)

         4,096

Salaries and wages payable

         4,096

(To record expense and liabilities for sick leave.)

2016

Salaries and wages payable (8*8*8*6)

         3,072

Cash

         3,072

(To record Sick leave paid.)

2017

Salaries and wages expense (8*8*9*10)

         5,760

Salaries and wages payable

         5,760

(To record expense and liabilities for vacation.)

2017

Salaries and wages expense (8*8*9*8)

4608

Salaries and wages payable

         4,608

(To record expense and liabilities for sick leave.)

2017

Salaries and wages expense (5184-4608)

            576

Salaries and wages payable (8*8*8*9)

         4,608

Cash (8*8*9*9)

         5,184

(To record vacation time paid.)

2017

Salaries and wages expense

            128

Salaries and wages payable (out of 7 sick leave, 2 leave from 2016 (8 -6 used in 2016) and remaining (7-2 from 2016) 5 from 2017 ((8*8*8*2)+(8*8*9*5))

         3,904

Cash (8*8*9*7)

         4,032

(To record sick leave paid.)

2016

Vacation leave

Sick leave

Beginning of year

                 -  

                 -  

Add : accrued

          5,120

          4,096

Less: paid

                 -  

        (3,072)

End of the year

          5,120

          1,024

2017

Beginning of year

          5,120

          1,024

Add : accrued

          5,760

          4,608

Less: paid

        (4,608)

        (3,904)

End of the year

          6,272

          1,728

2016

2017

Vacation Wages Payable

          5,120

          6,272

Sick Pay Wages Payable

          1,024

          1,728


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