In: Accounting
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.
Journal entries for the year 2016
Date | Particulars | Debit | Credit |
---|---|---|---|
2016 |
Salaries and Wages Expenses A/c.......Dr |
$10800 | |
To Salaries and Wages Payables (9 employeesX8 hours X 10 Days X $15) |
S10800 | ||
(Being to record accrue expense and liability for vacations) | |||
Salaries and Wages Expenses A/c.......Dr | $6480 | ||
To Salaries and Wages Payables (9 employeesX8 hours X 6 Days X $15) |
$6480 | ||
(Being to record accrue expense and liability for vacations) | |||
Salaries and Wages Expenses A/c.......Dr | $4320 | ||
To Cash (9 employeesX8 hours X 4 Days X $15) |
$4320 | ||
(Being to record sick leave paid) |
Journal Entry for the year 2017
Date | Particulars | Debit | Credit |
---|---|---|---|
2017 |
Salaries and Wages Expenses A/c.......Dr |
$12960 | |
To Salaries and Wages Payables (9 employeesX8 hours X 10 Days X $18) |
S12960 | ||
(Being to record accrue expense and liability for vacations) | |||
Salaries and Wages Expenses A/c.......Dr | $7776 | ||
To Salaries and Wages Payables (9 employeesX8 hours X 6 Days X $18) |
$7776 | ||
(Being to record accrue expense and liability for vacations) | |||
Salaries and Wages Expenses A/c.......Dr (11664-9720) | $1944 | ||
Salaries and Wages Payable A/c........Dr (9 employeesX8 hours X 9 Days X $15) |
$9720 | ||
To Cash (9 employeesX8 hours X 9 Days X $18) |
$11664 | ||
(Being to record sick leave paid) | |||
Salaries and Wages Expenses A/c.......Dr (6480-6048) | $432 | ||
Salaries and Wages Payable A/c........Dr (9 employeesX8 hours X 3 Days X $18)+ (9 employeesX8 hours X 2 Days X $15) |
$6048 | ||
To Cash (9 employeesX8 hours X 5 Days X $18) |
$6480 | ||
(Being to record sick leave paid) |
(b) Following are the calculation of liability for compensated absences that should be reported on balance sheet at December 31, 2016 and 2017.
2016 | 2016 | 2017 | 2017 | |
vacation wages payable | sick wages payable | vacation wages payable | sick wages payable | |
Jan1 Balance | $0 | $0 | $10800 | $2160 |
Add: Accrued | $10800 | $6480 | $12960 | $7776 |
Less: Paid | $0 | $4320 | $9720 | $6048 |
Dec 31 Balance | $10800 | $2160 | $14040 | $3888 |