Question

Zeile Company began operations on January 2, 2016. It employs 9 individuals who work 8‐hour days and are paid hourly. Each employee earns 10 paid vacation days and 6 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.  

Zeile Company has chosen not to accrue paid sick leave until used, and has chosen to accrue vacation time at expected future rates of pay without discounting. Additional information is as follows:    2016 2017 Actual Hourly Wage Rate (2016) $15.00 (2017) $18.00

Projected Future Pay Rates Used to Accrue Vacation Pay (2016) $16.00 (2017) $18.50

Vacation Days Used by Each Employee (2016) 0 (2017) 9 Sick Days Used by Each Employee (2016) 4 (2017) 5 Instructions  

(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.

Answer 1

Solution:

	2016	2017
Projected Rate Pay per Hour for Vacation	$16	$18.50
Hours	8	8
Vacation Leave	10	10
Employee	9	9
Accured Liability for Vacation (Multiplying all the above)	11520	13320

	2016	2017
Sick Days used by each Employee	4	5
Employee	9	9
Actual Wages Rate	$15	$18
Hour	8	8
Sick Leave Paid(Multiplying all the above)	4320	6480

JOURNAL ENTRIES:

	2016	2017
Vacation Days Used	0	9
Employee	9	9
Actual Wage Rate	$15	$18
Hour	8	8
Vacation Leave Paid (Multiplying all the above)	0	11664

DATE	ACCOUNT TITLE AND EXPLAINATION	DEBIT($)	CREDIT($)
2016
1	TO ACCRUE THE EXPENSES AND LIABILITY FOR VACATION
	wages and salaries expenses account debit	11520
	To wage and salary payable account		11520
2	TO RECORD SICK LEAVE PAID
	Wages and salaries expenses Account Debit	4320
	To Cash Account		4320
3	TO RECORD VACATION TIME PERIOD
	No Entry
2017
1	TO ACCRUE THE EXPENSES AND LIABILITIES FOR VACATION
	Wages and salaries expenses Account Debit	13320
	To Wages and salaries payable Account		13320
2	TO RECORD SICK LEAVE PAID
	Wages and salaries expenses Account Debit	6480
	To Cash Account		6480
3	TO RECORD VACATION TIME PERIOD
	Wages and salaries Payable Account Debit	11664
	To Cash Account		11664

SICK DAYS UNUTILIZED ACCUMULATE:

	2016	2017
Sick Leave Paid Allowed (in days)	6	6
Sick Leaves Used	4	5
Unutilized Days by Each Employee	2	1
Unutilized Days by Each Employee	2	1
Employee	9	9
Wage Rate	$15	$18
Hour	8	8
ACCUMULATED UNUSED SICK LEAVE (ACCRUED LIABILITY)	2160	1296