In: Accounting
Blue Company began operations on January 2, 2016. It employs 10
individuals who work 8-hour days and are paid hourly. Each employee
earns 12 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 |
Vacation Days Used |
Sick Days Used |
||||||||||
2016 |
2017 |
2016 |
2017 |
2016 |
2017 |
|||||||
$12 | $13 | 0 | 10 | 5 | 6 |
Blue 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. The company used the following projected
rates to accrue vacation time.
Year in Which Vacation |
Projected Future Pay Rates |
|
2016 | $12.36 | |
2017 | 13.34 |
Prepare journal entries to record transactions related to compensated absences during 2016 and 2017
Compute the amounts of any liability for compensated absences that should be reported on the balance sheet at December 31, 2016 and 2017.
a) 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. Round answers to 0 decimal places, e.g. 5,125.) | |||||
Date | Account Titles and Explanation | Debit | Credit | ||
2016 | Wages Expense | $ 11,520.00 | |||
Vacation Wages Payable | $ 11,520.00 | ||||
(To accrue the expense and liability for vacations) | |||||
10 employees X $12.00 hourly X 8 Hours a day X 12 days | |||||
Wages Expense | $ 6,720.00 | ||||
Sick Pay Wages Payable | $ 6,720.00 | ||||
(To accrue the expense and liability for Sick Pay) | |||||
10 employees X $12.00 hourly X 8 Hours a day X 7 days | |||||
Sick Pay Wages Payable | $ 4,800.00 | ||||
Cash | $ 4,800.00 | ||||
To record payment for compensated time when used by employees | |||||
10 employees X $12.00 hourly X 8 Hours a day X 5 days | |||||
2017 | Wages Expense | $ 12,480.00 | |||
Vacation Wages Payable | $ 12,480.00 | ||||
(To accrue the expense and liability for vacations) | |||||
10 employees X $12.00 hourly X 8 Hours a day X 12 days | |||||
Wages Expense | $ 7,280.00 | ||||
Sick Pay Wages Payable | $ 7,280.00 | ||||
(To accrue the expense and liability for Sick Pay) | |||||
10 employees X $13.00 hourly X 8 Hours a day X 7 days | |||||
Wages Expense | $ 800.00 | ||||
Vacation Wages Payable | $ 9,600.00 | ||||
Cash | $ 10,400.00 | ||||
(To record vacation time paid) | |||||
10 employees X $12.00 hourly X 8 Hours a day X 10 days | $ 9,600.00 | ||||
10 employees X $13.00 hourly X 8 Hours a day X 10 days | $ 10,400.00 | ||||
Wage Expenses | $ 160.00 | ||||
Sick Pay Wages Payable | $ 6,080.00 | ||||
Cash (10 x 13 x 8 x 6) | $ 6,240.00 | ||||
(To record sick leave paid) | |||||
10 employees X $13/hr. X 8 hrs./day X (6-2)days | $ 4,160.00 | ||||
10 employees X $12/hr. X 8 hrs./day X( 7-5)days) | $ 1,920.00 | ||||
Total | $ 6,080.00 | ||||
b) Compute the amounts of any liability for compensated absences that should be reported on the balance sheet at December 31, 2016 and 2017. (Round answers to 0 decimal places, e.g. 5,125.) | 2016 | 2017 | |||
Vacation Wages Payable | |||||
Beginning balance | 0 | $ 11,520.00 | |||
+ accrued | $ 11,520.00 | $ 12,480.00 | |||
- paid | 0 | $ 9,600.00 | |||
Accrued liability on Dec. 31 balance | $ 11,520 | $ 14,400 | |||
Sick Pay Wages Payable | |||||
2016 | 2017 | ||||
Vacation Wages Payable | |||||
Beginning balance | 0 | $ 1,920.00 | |||
+ accrued | $ 6,720.00 | $ 7,280.00 | |||
- paid | $ 4,800.00 | $ 6,080.00 | |||
Accrued liability on Dec. 31 balance | $ 1,920 | $ 3,120 |