A business provides its employees with varying amounts of vacation per year, depending on the length...
A business provides its employees with varying amounts of vacation per year, depending on the length of employment. The estimated amount of the current year's vacation pay is $74,400.
Journalize the adjusting entry required on January 31, the end of the first month of the current year, to record the accrued vacation pay.
b. How is the vacation pay reported on the company's balance sheet?
, unless employees are allowed to accumulate their vacation pay for use in future years.
When is this amount removed from the company's balance sheet?
Homework Answers
A . Journal Entry:
| Date | Account Name | Debit | Credit |
| Jan. 31 | Vacation Pay Expense | $6200 | |
| To Vacation Pay Payable | $6200 | ||
| ( To record accrued vacation Pay) |
( $ 74,400 ×1/12)
B.
1)Vacation pay is reported as a current liability on the balance sheet.
2) If employees are allowed to accumulate their vacation pay, then the estimated vacation pay that will not be taken in the current year will be reported as a long-term liability.
3) When employees take vacations, the liability for vacation pay is decreased.
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