Question

Matt Broderick Company began operations on January 2, 2013. 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. Additional information is as follows.

Actual Hourly wage rate 2016 2017    Vacation days used by each employee    2016    2017 Sick days used by each employee    2016    2017

   $10 $11 0    9 4 5
(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. Please explain each step with each calculation

Answer 1

Part 1

Date	account titles and explanation	debit	credit
2016	Salaries and wages expense	7200
	Salaries and wages payable (9 employees *8hours*10days*$10)		7200
	(To accrue the expense and liability for vacations)
2016	Salaries and wages expense	4320
	Salaries and wages payable (9 employees * 8 hours * 6 days * $10)		4320
	(To accrue the expense and liability for sick pay)
2016	Salaries and wages payable	2880
	Cash (9 employees * 8 hours * 4 days *$10)		2880
	(To record sick leave paid)
2017	Salaries and wages expense	7920
	Salaries and wages payable (9 employees * 8 hours * 10 days * $11)		7920
	(To accrue the expense and liability for vacations)
2017	Salaries and wages expense	4752
	Salaries and wages payable (9 employees *8 hours * 6 days* $11)		4752
	(To accrue the expense and liability for sick pay)
2017	Salaries and wages expense (7128-6480)	648
	Salaries and wages payable (9 employees * 8hours*9 days *$10)	6480
	Cash (9 employees * 8 hours * 9 days * $11)		7128
	(To record vacation time paid)
2017	Salaries and wages expense (3960-3816)	144
	Salaries and wages payable (9*8*11*3)+(9*8*10*2)	3816
	Cash (9 employees * 8 hours * $11 * 5 days)		3960
	(To record payment for compensated time when used by employees)

Part B

Vacation wages payable 2016......7200

Sick wages payable 2016.............1440 (4320-2880)

Vacation wages payable 2017.....8640 (7200+7920-6480)

Sick wages payable 2017........... 2376 (1440+4752-3816)