Question

Sarasota Company began operations on January 2, 2016. It employs 12 individuals who work 8-hour days and are paid hourly. Each employee earns 9 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						Vacation Days Used by Each Employee				Sick Days Used by Each Employee
2016			2017			2016		2017		2016		2017
$9			$10			0		8		4		5

Sarasota 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.

Prepare journal entries to record transactions related to compensated absences during 2016 and 2017. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
2016
	(To accrue the expense and liability for vacations)
	(To accrue the expense and liability for sick pay)
	(To record payment for compensated time when used by employees)
2017
	(To accrue the expense and liability for vacations)
	(To accrue the expense and liability for sick pay)
	(To record vacation time paid)
	(To record sick leave paid)

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Part 2

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
Vacation Wages Payable		$		$
Sick Pay Wages Payable		$		$

Answer 1

Date	Account titles and explanation					Debit	Credit
2016	Salaries expense					7776
	Salaries payable						7776
	(12 employees*$9 rate/hour*8 hours/day*9 days)
	(To accrue the expense and liability for vacations)
	Salaries expense					5184
	Salaries payable						5184
	(12 employees*$9 rate/hour*8 hours/day*6 days)
	(To accrue the expense and liability for sick pay)
	Salaries payable					3456
	Cash						3456
	(12 employees*$9 rate/hour*8 hours/day*4 days)
	(To record payment for compensated time when used by employees)
2017	Salaries expense					8640
	Salaries payable						8640
	(12 employees*$10 rate/hour*8 hours/day*9 days)
	(To accrue the expense and liability for vacations)
	Salaries expense					5760
	Salaries payable						5760
	(12 employees*$10 rate/hour*8 hours/day*6 days)
	(To accrue the expense and liability for sick pay)
	Salaries expense				(7680-6912)	768
	Salaries payable					6912
	(12 employees*$9 rate/hour*8 hours/day*8 days)
	Cash						7680
	(12 employees*$10 rate/hour*8 hours/day*8 days)
	(To record vacation time paid)
	Salaries expense				(4800-4608)	192
	Salaries payable				(Note:1)	4608
	Cash						4800
	(12 employees*$10 rate/hour*8 hours/day*5 days)
	(To record sick leave paid)
	Note:1
	Year 2016:
						No.of days
	Sick leave days eligible					6
	Less: sick days used					4
	Balance					2
	This 2 days can be used in 2017 salaries payable
	Salaries payable to be debited:
						$
	(12 employees*$9 rate/hour*8 hours/day*2 days)					1728
	(12 employees*$10 rate/hour*8 hours/day*3 days)					2880
	(5 days used in 2017-2 days from 2016=3 days)
	Total					4608