Question

Bridgeport Company began operations on January 2, 2019. It employs 10 individuals who work 8-hour days and are paid hourly. Each employee earns 11 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
2019			2020			2019		2020		2019		2020
$11			$12			0		10		4		5

Bridgeport Company has chosen not to accrue paid sick leave until used, and has chosen to accrue vacation time at expected future rates of pay without discounting. The company used the following projected rates to accrue vacation time.

Year in Which Vacation Time Was Earned		Projected Future Pay Rates Used to Accrue Vacation Pay
2019		$11.40
2020		12.30

(a) 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 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to decimal places, e.g. 5,125.) Debit Credit Date Account Titles and Explanation 2019 (To accrue the expense and liability for vacations) (To record sick leave paid) (To record vacation time paid) 2020

Answer 1

Answer:

(a) (1) Prepare journal entries to record transactions related to compensated absences during 2019.
2016	To accrue the expense and liability for vacations
Salaries and Wages Expense	10,032		(1)
Salaries and Wages Payable		10,032
2016	To record sick leave paid
Salaries and Wages Expense	3,520		(2)
Salaries and Wages Payable		3,520
2016	To record vacation time paid
No entry,
since no vacation days were used.
(a) (2) Prepare journal entries to record transactions related to compensated absences during 2020.
2017	To accrue expense and liability for vacations
Salaries and Wages Expense	10,824		(3)
Salaries and Wages Payable		10,824
2017	To record sick leave paid
Salaries and Wages Expense	4,800		(4)
Cash		4,800
2017	To record vacation time paid
Salaries and Wages Expense	480
Salaries and Wages Payable	9,120		(5)
Cash		9,600	(6)
	employees		per hour		hours per day		days
(1)	10	*	$11.40	*	8	*	11	=	$10,032	(1)
(2)	10	*	$11.00	*	8	*	4	=	$3,520	(2)
(3)	10	*	$12.30	*	8	*	11	=	$10,824	(3)
(4)	10	*	$12.00	*	8	*	5	=	$4,800	(4)
(5)	10	*	$11.40	*	8	*	10	=	$9,120	(5)
(6)	10	*	$12.00	*	8	*	10	=	$9,600	$47,896	(6)
Note: Vacation days and sick days are paid at the employee’s current wages
(b) Compute the amounts of any liability for compensated absences that should be reported on the balance sheet at December 31, 2019, and 2020.
	Accrued liability at year-end		Accrued liability at year-end
	2019		2020
Jan. 1 balance	$0		$10,032
Plus accrued	10,032		10,824
Less paid	0		(9,120)
Dec. 31 balance	$10,032	(1)	$11,736	(2)
	employees		per hour		hours per day		days
(1)	10	*	$11.40	*	8	*	11	=	$10,032
(2)	10	*	$11.40	*	8	*	1	=	$912
10	*	$12.30	*	8	*	11	=	$10,824
	$11,736