Question
In: Accounting
Employees earn vacation pay at the rate of one day per month. During the month of...
Employees earn vacation pay at the rate of one day per month. During the month of June, 10 employees qualify for one vacation day each. Their average daily wage is $150 per day. Which of the following is the necessary adjusting journal entry to record the June vacation benefits?
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Expert Solution
Computation of Vacation benefits payable:
No. of employees who qualify for benefit in june= 10
Benefit of 1 day paid vacation =$150
(Avg. Daily wage)
Total amount of Vacation benefit payable=$150*10= $1500
This is an Accrued expense for the company as the benefits payable account for June month but will be paid to employees in the later periods.
As with any Accrued expenses, Vacation benefits payable should be recorded in the current year as Current liability and hence should be credited. While the Vacation benefit expense should be debited.
Adjusting journal entry:
| Date | Account | Debit($) | Credit($) |
| Dec 31 | Vacation Benefits expense | 1500 | |
| Vacation Benefits Payable | 1500 |
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