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Pearl Company began operations on January 2, 2016. It employs 12 individuals who work 8-hour days...

  1. Pearl Company began operations on January 2, 2016. It employs 12 individuals who work 8-hour days and are paid hourly. Each employee earns 13 paid vacation days and 8 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

$13

$15

0

12

5

7


Pearl 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
Time Was Earned

Projected Future Pay Rates
Used to Accrue Vacation Pay

2016

$14.19

2017

  15.31

  1. Prepare journal entries to record transactions related to compensated absences during 2016 and 2017.

2016: 1. To accrue expense and liability for vacations

2. To record sick leave paid

Date

Accounts

DR

CR

1.

2.

2017: 1. To accrue expense and liability for vacations

2. To record sick leave paid

3. To record vacation time paid

Date

Accounts

DR

CR

1.

2.

3.

  1. 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

Accrued liability

$

$

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