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In: Accounting

1. Pearl Company began operations on January 2, 2016. It employs 9 individuals who work 8-hour...

1. Pearl Company began operations on January 2, 2016. It employs 9 individuals who work 8-hour days and are paid hourly. Each employee earns 9 paid vacation days and 7 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
$6 $7 0 8 5 6


Pearl 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.

a) prepare journal entries to record transactions related to compensated absences during 2016 and 2017

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

2. Cullumber Company sells televisions at an average price of $879 and also offers to each customer a separate 3-year warranty contract for $93 that requires the company to perform periodic services and to replace defective parts. During 2017, the company sold 294 televisions and 204 warranty contracts for cash. It estimates the 3-year warranty costs as $21 for parts and $31 for labor, and accounts for warranties separately. Assume sales occurred on December 31, 2017, and straight-line recognition of warranty revenues occurs.

a) Record any necessary journal entries in 2017.

b) What liability relative to these transactions would appear on the December 31, 2017, balance sheet and how would it be classified?

c) In 2018, Cullumber Company incurred actual costs relative to 2017 television warranty sales of $1,920 for parts and $3,960 for labor.

Record any necessary journal entries in 2018 relative to 2017 television warranties. Use "Inventory" account to record the warranty expense.

d) What amounts relative to the 2017 television warranties would appear on the December 31, 2018, balance sheet and how would they be classified?

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Expert Solution

ekkarill92 answered 3 months ago
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