Question

Bramble Company began operations on January 2, 2019. It employs 11 individuals who work 8-hour days and are paid hourly. Each employee earns 11 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
$8			$9			0		10		5		6

Bramble 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.

Compute the amounts of any liability for compensated absences that should be reported on the balance sheet at December 31, 2019 and 2020.

		2019		2020
Vacation Wages Payable		$enter a dollar amount		$enter a dollar amount
Sick Pay Wages Payable		$enter a dollar amount		$enter a dollar amount

Answer 1

Answer

Calcualtion of liability for compensated absences that should be reported on balance sheet at December 31,2019 and 2020.

2019 2020

Vacation Sick pay Vacation Sick pay

Wages payable   Wages payable Wages Payable Wages payable

Jan 2, 2019 $0 $ 0 $ 7,744 $1,408

Add:Accrued $7,744 $4,928 $8,712 $5,544

Less: Paid ($0) ($3,520) ($7,744) ($3,784)

Dec 31. Balance $ 7,744 $1,408 $8,712 $3,168

Explanation

Following are the preparation of journal entries:

Journal Entries

For the year of 2019

Account title & Explanation Debit ($) Credit ($)

1) Salary & Wages Expenses 7,744

To Salary & Wages payable 7,744

(11 Employees x 8 hours x 11 days x $8)

(Being to record accrue expense & liablity for vacations)

2)

Salary & Wages Expenses 4,928

To Salary & Wages payable 4,928

(11 Employees x 8 hours x 7 days x $8)

(Being to record accrue expense & liablity for sick pay)

3) Salary & Wages Expenses 3,520

To Cash 3,520

(11 Employees x 8 hours x 5 days x $8)

(Being to record sick leave paid)

  

Journal Entries

For the year of 2020

Account title & Explanation Debit ($) Credit ($)

1) Salary & Wages Expenses 8,712

To Salary & Wages payable 8,712

(11 Employees x 8 hours x 11 days x $9)

(Being to record accrue expense & liablity for vacations)

2)

Salary & Wages Expenses 5,544

To Salary & Wages payable 5,544

(11 Employees x 8 hours x 7 days x $9)

(Being to record accrue expense & liablity for sick pay)

3)

Salary & Wages Expenses ($8,712-$7,744)    968

   Salary & Wages payable   7,744

(11 Employees x 8 hours x 11 days x $ 8)   

To Cash 8,712

( 11 Employees x 8 hours x 11 days x $9)

(Being to record sick leave paid)

4)

Salary & Wages Expenses ($3,960-$3,784) 176

   Salary & Wages payable 3,784

(11 Employees x 8 hours x 3 days x $ 9 +

11 Employees x 8 hours x 2 days x $ 8)   

To Cash 3,960

( 11 Employees x 8 hours x 5 days x $9)

(Being to record sick leave paid)

(Being to record accrue expense & liablity for sick pay)