Question

Tamarisk Company began operations on January 2, 2019. It employs 9 individuals who work 8-hour days and are paid hourly. Each employee earns 9 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
$12			$13			0		8		4		5

Tamarisk 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.

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

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

Answer 1

Date	Account Titles and Explanation	Debit	Credit
2019	Salaries and wages expense (9 x 8 x 9 x $12)	7776
	Salaries and wages payable		7776
	(To accrue the expense and liability for vacations)
	Salaries and wages expense (9 x 8 x 6 x $12)	5184
	Salaries and wages payable		5184
	(To accrue the expense and liability for sick pay)
	Salaries and wages payable (9 x 8 x 4 x $12)	3456
	Cash		3456
	(To record payment for compensated time when used by employees)
2020	Salaries and wages expense (9 x 8 x 9 x $13)	8424
	Salaries and wages payable		8424
	(To accrue the expense and liability for vacations)
	Salaries and wages expense (9 x 8 x 6 x $13)	5616
	Salaries and wages payable		5616
	(To accrue the expense and liability for sick pay)
	Salaries and wages expense	576
	Salaries and wages payable (9 x 8 x 8 x $12)]	6912
	Cash (9 x 8 x 8 x $13)		7488
	(To record vacation time paid)
	Salaries and wages expense	144
	Salaries and wages payable [(9 x 8 x 2 x $12) + (9 x 8 x 3 x $13)]	4536
	Cash (9 x 8 x 5 x $13)		4680
	(To record sick leave paid)

On Balance Sheet at December 31:

	2019	2020
Vacation Wages Payable	$                7,776	$                                9,288
		($7776 + $8424 - $6912)
Sick Pay Wages Payable	$                1,728	$                                2,808
	($5184 - $3456)	($1728 + $5616 - $4536)