Question

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Exercise 13-5 (Algo) Pald future absences [LO13-3] On January 1, 2021. Poplar Fabricators Corporation agreed to grant its employees two weeks of vacation each year, with the stipulation that vacations earned each year can be taken the following year. For the year ended December 31, 2021, Poplar Fabricators employees each earned an average of $800 per week. Eight hundred vacation weeks earned in 2021 were not taken during 2021. Required: 1. Prepare the appropriate adjusting entry for vacations earned but not taken in 2021. 2. Suppose that, by the time vacations actually are taken in 2022. salary rates for employees have risen by an average of 5 percent from their 2021 level. Also, assume salaries earned in 2022 (including vacations earned and taken in 2022) were $33 million. Prepare a journal entry that summarizes 2022 salaries and the payment for 2021 vacations taken in 2022 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the appropriate adjusting entry for vacations earned but not taken in 2021. (If no entry is required for a transaction/event, select "No journal entry required in the first account field.) View transaction list Journal entry worksheet Record the adjusting entry for vacations earned but not taken in 2021. Note: Enter debits before credits. Event General Journal Debit Credit Record entry Clear entry View general journal Required 1 Required 2 >

Answer 1

AnsA). Vacation pay carried over in 2022 = (Number of vacation weeks earned * vacation pay per week)

= (800*$800)

= $640,000

As wages expense decreases the value of stockholder equity , therefore debit wages expense by 640,000 and liability compensated future absence is a liability and as it increase by 640,000

Date	Account title and explanation	Debit($)	Credit($)
2021	Wages expenses	$640,000
	Liability- compensated future absence		640,000
	( to record vacations earned but not taken in 2021)

B). 2018 wages expenses= (33,000,000 + 5%*640,000)

= 33,000,000 + 32,000

= $ 33,032,000

Cash paid= $33,032,000 + 640,000

= $ 33,672,000

Journal entry

Date	Account title and explanation	Debit($)	Credit($)
2021	Wages expense	33,032,000
	Liability- compensated future absence	640,000
	Cash		33,672,000
	( to record 2022 wages and the payment for 2021 vacations taken in 2022)