Question

Shamrock Company began operations on January 2, 2016. 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 fallows. Vacation Days Used by Each Employee 2016 2017 2016 2017 2016 2017 Actual Hourly Wage Rate Sick Days Used by Each Employee $7 $8 0 Shamrock Company has chosen to accrue the cost of compensated absences at rates of pay in effect during the period when eaed and to accrue sick pay when eamed. 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 O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation 2016 Salaries and Wages Expense Debit Credit alaries and Wages Payable To accrue the expense and liability for vacations) alaries and Wages Expense alaries and Wages Payable To accrue the expense and liability for sick pay) alaries and Wages Payable To record payment for compensated time when used by employees) 2017 Salaries and Wages Expense alaries and Wages Payable To accrue the expense e and liability for vacations) laries and Wages Expense alaries and Wages Payable To accrue the expense and liability for sick pay) alaries and Wages Expense alaries and Wages Payable ash To record vacation time paid) alaries and Wages Expense alaries and Wages Payable ash To record sick leave pald CQ กาวute 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

Year	Event
2016	To Accrue the expenses and liability for vacations
	"No Entry"
Reason : No Vacation Days used by any employees.
Neither Accumulation is not allowed for Vacations. Hence there will be no liability
Year	Event
2016	To Accrue the expenses and liability for Sick Pay
	Accountant Title	Debit	Credit
	Salaries and Wages Expenses	$            3,696
	Salaries and Wages Payable		$                 3,696
	Detailed Calculation
	Paid Sick Days for the year	$                    6
	Number of Employees	11
	Total Days to be Accrued for all employees (11*6)	$                  66
	Number of Paid Hours in a Days	$                    8
	Hourly Wage Rate	$                    7
	Total Wage to be paid per day (8*7)	$                  56
	Total Amount to be Accrued - (56*66)	$            3,696
Year	Event
2016	To Record payment of compensated time when used by employees
	Accountant Title	Debit	Credit
	Salaries and Wages Payable	$            2,464
	Cash		$                 2,464
	Detailed Calculation
	Number of Employees	11
	Number of Sick Days used by Each Employee	4
	Total of Sick Days used by All Employees	44
	Number of Paid Hours in a Days	$                    8
	Hourly Wage Rate	$                    7
	Total Wage to be paid per day (8*7)	$                  56
	Total Amount to be paid for the year - (56*44)	$            2,464
Year	Event
2017	To Accrue the expenses and liability for vacations
	Accountant Title	Debit	Credit
	Salaries and Wages Expenses	$            6,336
	Salaries and Wages Payable		$                 6,336
	Detailed Calculation
	Number of Employees	11
	Number of Vacation Days used by Each Employee	9
	Total of Vacation Days used by All Employees	99
	Number of Paid Hours in a Days	$                    8
	Hourly Wage Rate	$                    8
	Total Wage to be paid per day (8*8)	$                  64
	Total Provision to be taken for all employees (99*64)	$            6,336
Note: In case of Vacation days no accumulation is allowed, hence provision to be taken
for actual utilisaton days only
Year	Event
2017	To Accrue the expenses and liability for Sick Pay
	Accountant Title	Debit	Credit
	Salaries and Wages Expenses	$            4,224
	Salaries and Wages Payable		$                 4,224
	Detailed Calculation
	Paid Sick Days for the year	$                    6
	Number of Employees	11
	Total Days to be Accrued for all employees (11*6)	$                  66
	Number of Paid Hours in a Days	$                    8
	Hourly Wage Rate	$                    8
	Total Wage to be paid per day (8*8)	$                  64
	Total Amount to be Accrued - (64*66)	$            4,224
Year	Event
2016	To Record Vacation time paid
	Accountant Title	Debit	Credit
	Salaries and Wages Expenses	NIL
	Salaries and Wages Payable	$            6,336
	Cash		$                 6,336
Reamrks : Payment made of vacation time as provisioed above only for the days vacation taken
Year	Event
2017	To Sick Leave Paid
	Accountant Title	Debit	Credit
	Salaries and Wages Expenses	NIL
	Salaries and Wages Payable	$            3,520
	Cash		$                 3,520
	Detailed Calculation
	Number of Employees	11
	Number of Sick Days used by Each Employee	5
	Total of Sick Days used by All Employees	55
	Number of Paid Hours in a Days	$                    8
	Hourly Wage Rate	$                    8
	Total Wage to be paid per day (8*7)	$                  64
	Total Amount to be paid for the year - (64*55)	$            3,520

Computation of Amount of Liability for compansated absences that will be reported in the balance Sheet
Calculation as on 31st Dec 2016	Opening Balance	Provision taken during the yea	Payment Made during the year	Closing Provision
Vacation Wages payable	$                   -	$                       -	$                             -	$                   -
Sick Pay Wages payable	$                   -	$                 3,696	$                      2,464	$            1,232
Calculation as on 31st Dec 2017	Opening Balance	Provision taken during the yea	Payment Made during the year	Closing Provision
Vacation Wages payable	$                   -	$                 6,336	$                      6,336	$                   -
Sick Pay Wages payable	$            1,232	$                 4,224	$                      3,520	$            1,936