Question

Compensated Absences Matt Broderick Company began operations on January 2, 2016. The following information was provided concerning the company's employees who are paid hourly Number of individuals employed Number of hours worked per day Paid vacation days earned annually by each employee Paid sick days earned annually by each employee 9 employees 8 hours 10 days 6 days 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 Emplo Sick Days Used by Each Emplo 2016 $10 2016 2017 $11 2016 4 2017 2017 Matt Broderick 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 follow ng projected rates to accrue vacation time Year in Which Vacation Time Was Earned 2016 2017 Projected Future Pay Rates Used to Accrue Vacation Pay $10.75 11.60

Answer 1

Ans) a)

	Journal Entries
	for the year 2016
Year	Transactions	Debit	Credit
2016	Salary & Wages Exp a/c	7,200 (i)
	To Salary & Wages Payable a/c		7,200(i)
	(being accrue expenses for vacations)
2016	Salary & Wages Exp a/c	4320(ii)
	To Salary & Wages Payable a/c		4320(ii)
	(being accrue expenses for sick leave pay)
2016	Salary & Wages Payable a/c	2880(iii)
	To cash a/c		2880(iii)
	(being sick leave paid)

Calculations;

Formula-

Amount = Employees * Per hour * working hours per day * no of days

i) Amount= 9* $10*8*10= 7200

ii) Amount= 9* $10*8*6= 4320

iii) Amount= 9* $10*8*4= 2880

	Journal Entries
	for the year 2017
Year	Transactions	Debit	Credit
2017	Salary & Wages Exp a/c	7920(i)
	To Salary & Wages Payable a/c		7920(i)
	(being accrue the expenses for vacations)
2017	Salary & Wages Exp a/c	4752(ii)
	To Salary & Wages Payable a/c		4752(ii)
	(being accure expenses for sick leave pay)
2017	Salary & Wages Exp a/c	648
	Salary & Wages Payable a/c	6480(iii)
	To Cash a/c		7128(v)
	(being payment of vacation period)
2017	Salary & Wages Exp a/c	144
	Salary & Wages Payable a/c	3816(iv)
	To Cash a/c		3960(vi)
	(being payment for sick leave)

Calculations;

Formula as stated above;

Amount= Employees * Per hour * working hours per day * no of days

i) amount= 9*$11*8*10=7920

ii) amount= 9*$11*8*6= 4752

iii) amount= 9*$10*8*9= 6480

iv) amount= (9*$11*8*3)2376 + 1440 (9*$10*8*2)=3816

v) amount= 9*$11*8*9= 7128

vi) amount= 9*$11*8*5= 3960

Note; amount for sick days and vacation paid at current wage. The FIFO (first in first out) basis has been applied whenever the payment needed to be done at different rates.

Ans b) 2016

	Vacation wages	Sick pay
	payable	wages payable
1-Jan	$0	$0
add; accrued	7200	4320
less; paid		-2880
Balance	7200(i)	1440(ii)

2017

	Vacation wages	Sick pay
	payable	wages payable
1-Jan	$7,200	$1,440
add; accrued	7920	4752
less; paid	-6480	-3816
Balance	8640(iii)	2376(iv)

Calculations;

Formula- Amount= Employees * Per hour * working hours per day * no of days

i) amount= 9*$10*8*10=7200

ii) amount= 9*$10*8*2=1440

iii) amount= (9*$10*8*1)720+ (9*$11*8*10)7920=8640

iv) amount= 9*$11*8*3= 2376