Question

Exercise 13-03 Stellar Company began operations on January 2, 2019. It employs 11 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 2019 2020 $7 $8 Vacation Days Used by Each Employee 2019 2020 Sick Days Used by Each Employee 2019 2020 Stellar Company has chosen to accrue the cost of compensated absences at rates of pay in effect during the period when earned and to accrue sick pay when earned. Your answer is partially correct. Try again. Prepare journal entries to record transactions related to compensated absences during 2019 and 2020. (If no entry is required, select "No Entry" for the account titles and enter o for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit 2019 salaries and Wages Expen 6160 6160 Salaries and Wages Pay (To accrue the expense and liability for vacations) 2 Salaries and Wages Expen 3696 3696 Salaries and Wages Pay (To accrue the expense and liability for sick pay)

Answer 1

Answer :-

Journal entries to record transactions related to compensated absences during 2019 and 2020 is follows :-

Explanation:

Date	Account titles and Explanation	Dr	Cr
2019	Salaries and wages expense	6160
	Salaries and wages payable (11 employees × 8hours × 10days × $7)		6160
	(To accrue the expense and liability for vacations)
	Salaries and wages expense	3696
	Salaries and wages payable (11 employees × 8 hours × 6 days × $7)		3696
	(To accrue the expense and liability payable sick pay)
	Salaries and wages payable	2464
	Cash (11 employees * 8 hours * 4 days *$7)		2464
	(To record sick leave paid)
2020	Salaries and wages expense	7040
	Salaries and wages payable (11 employees * 8 hours * 10 days × $8)		7040
	(To accrue the expense and liability for vacations)
	Salaries and wages expense	4224
	Salaries and wages payable (11 employees *8 hours * 6 days* $8)		4224
	(To accrue the expense and liability for sick pay)
	Salaries and wages expense (6336 - 5544)	792
	Salaries and wages payable (11 employees * 8hours*9 days *$7)	5544
	Cash (11 employees * 8 hours * 9 days * $8)		6336
	(To record vacation time paid)
	Note :- Here Salary and wages payable are taken at the rate of $7 because there is 10 days of vacation left for 2019 )
	Salaries and wages expense (3960-3816)	176
	Salaries and wages payable (11 employees × 8 hours × $8 × 3 days)+(11 employees × 8 hours × $7 × 2 days)	3344
	Cash (11 employees * 8 hours * $8 * 5 days)		3520
	(To record payment for compensated time when used by employees)
	Note :- Here Salary and wages payable are taken as $7 for 2 days because there is 2019 sick leave left out and $8 for 3 days for 2020 sick leave)

Compute the amounts of any liability for compensated absences that should be reported on the balance sheet at December 31, 2019, and 2020

Liability	2013	2014
Vacation wages payable	6160	7656 (6160 + 7040 - 5544)
Sick wages payable	1232 (3696 - 2464)	2112 (1232 + 4224 - 3344)