Question

Pina Company began operations on January 2, 2019. It employs 10 individuals who work 8-hour days and are paid hourly. Each employee earns 9 paid vacation days and 7 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
2019			2020			2019		2020		2019		2020
$12			$13			0		8		5		6

Pina 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 2019 and 2020.

Answer 1

Date	Account titles and explanation	Debit	Credit
2019	Salaries and wages expense	8640
	Salaries and wages payable (10 employees X $12.00/hr. X 8 hrs./day X 9 days)		8640
	(to accrue the expense and liability for vacation)
	Salaries and wages expense (10 employees X $12.00/hr. X 8 hrs./day X 7 days)	6720
	Salaries and wages payable		6720
	(to accrue the expense and liability for sick pay)
	Salaries and Wages Payable	4800
	Cash (10 employees X $12.00/hr. X 8 hrs./day X 5 days)		4800
2020	Salaries and wages expense (10 employees X $13.00/hr. X 8 hrs./day X 9 days)	9360
	Salaries and wages payable		9360
	(to accrue the expense and liability for vacation)
	Salaries and wages expense	7280
	Salaries and wages payable (10 employees X $13.00/hr. X 8 hrs./day X 7 days)		7280
	(to accrue the expense and liability for sick pay)
	Salaries and wages expense (balancing figure)	640
	Salaries and wages payable (10 employees X $12.00/hr. X 8 hrs./day X 8 days)	7680
	Cash (10 employees X $13.00/hr. X 8 hrs./day X 8 days)		8320
	(to record vacation time period))
	Salaries and Wages Expense (10 employees X ($13-12) /hr. X 8 hrs./day X (7-5) last yr)	160
	Salaries and Wages Payable (10 employees X $12.00/hr. X 8 hrs./day X (7-5) days) + (10 employees X $13.00/hr. X 8 hrs./day X (6-2) days)	6080
	Cash (10 employees X $13.00/hr. X 8 hrs./day X 6 days)		6240
	(to record sick leave paid)