Question

Windsor Company began operations on January 2, 2016. It employs 8 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
$7			$8			0		8		5		6

Windsor 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)

List of Accounts

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

Answer 1

Journal entries
Date	General journal	Debit	Credit
2016	Salaries and wages expense (8 employee * $7 * 8 hour * 9 day)	4,032
	Salaries and wages payable		4,032
	(To record expense and liabilities for vacation.)
2016	Salaries and wages expense (8 employee * $7 * 8 hour * 7 day)	3,136
	Salaries and wages payable		3,136
	(To record expense and liabilities for sick leave.)
2016	Salaries and wages payable (8 employee * $7 * 8 hour * 5 day)	2,240
	Cash		2,240
	(To record Sick leave paid.)
2017	Salaries and wages expense (8 employee * $8 * 8 hour * 9 day)	4,608
	Salaries and wages payable		4,608
	(To record expense and liabilities for vacation.)
2017	Salaries and wages expense (8 employee * $8 * 8 hour * 7 day)	3,584
	Salaries and wages payable		3,584
	(To record expense and liabilities for sick leave.)
2017	Salaries and wages expense (4096 - 3584)	512
	Salaries and wages payable (8 employee * $7 * 8 hour * 8 day)	3,584
	Cash (8 employee * $8 * 8 hour * 8 day)		4,096
	(To record vacation time paid.)
	(out of 6 sick leave, 2 leave from 2016 (7 -5 used in 2016) and remaining (6-2 from 2016) 4 from 2017 [ ((8*8*$7*2)+(8*8*$8*4)) = 2944 ]
2017	Salaries and wages expense (3072 - 2944)	128
	Salaries and wages payable	2,944
	Cash (8 employee * $8 * 8 hour * 6 day)		3,072
	(To record sick leave paid.)

2016	Vacation leave	sick leave
Beginning of year	-	-
Add : accrued	4,032	3,136
less: paid	-	(2,240)
end of the year	4,032	896
2017
Beginning of year	4,032	896
Add : accrued	4,608	3,584
less: paid	(3,584)	(2,944)
end of the year	5,056	1,536
Year	2016	2017
Vacation Wages Payable	4,032	5,056
Sick Pay Wages Payable	896	1,536