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Broderick Company began operations on January 2, 2019. It employs 9 individuals who work 8-hour days and are paid hourly. Each employee earns 10 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 Vacation Days Used 00 Sick Days Used
Wage Rate 00 by Each Employee by Each Employee

2019 2020 2019 2020 2019 2020
$10 $11 0 9 4 5
Broderick 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.
Instructions
a. Prepare journal entries to record transactions related to compensated absences during 2019 and 2020.
b. Compute the amounts of any liability for compensated absences that should be reported on the balance sheet at December 31, 2019 and 2020.

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Answer:

A.

2019

Dr Salaries and Wages Expenses $7,200

Cr Salaries and Wages Payable $7,200

2019

Dr Salaries and Wages Expenses $4,320

Cr Salaries and Wages Payable $4,320

2019

Dr Salaries and Wages Payable $2,880

Cr Cash $2,880

1b.

2020

Dr Salaries and Wages Expenses $7,920

Cr Salaries and Wages Payable $7,920

2020

Dr Salaries and Wages Expenses$4,752

Cr Salaries and Wages Payable $4,752

2020

Dr Salaries and Wages Expenses $ 648

Dr Salaries and Wages Payable $6,480

Cr Cash $7,128

2020

Dr Salaries and Wages Expenses $ 144

Dr Salaries and Wages Payable $3,816

Cr Cash $3,960

B. Vacation Wages Payable at December 31, 2019= $7,200

Sick Pay Wages Payable at December 31, 2019= $1,440

Vacation Wages Payable at December 31, 2020 = $8,640

Sick Pay Wages Payable at December 31, 2020

= $2,376

Explanation:

A. Preparation of the journal entries to record transactions related to compensated absences during 2019 and 2020.

1a) Prepare journal entries to record transactions related to compensated absences during 2019

2019

Dr Salaries and Wages Expenses $7,200

Cr Salaries and Wages Payable $7,200

(9 employees * $10 per hour * 8 hours per day * 10 days)

(Being to Record Accrue expenses and liabilities for Vacations)

2019

Dr Salaries and Wages Expenses $4,320

Cr Salaries and Wages Payable $4,320

( 9 employees * $10 per hour * 8 hours per day * 6 days )

(Being to Record Accrue expenses and liabilities for Sick Pay)

2019

Dr Salaries and Wages Payable $2,880

Cr Cash $2,880

( 9 employees * $10 per hour * 8 hours per day * 4 days)

(Being to Record Sick leave paid)

1b) Preparation of the journal entries to record transactions related to compensated absences during 2020

2020

Dr Salaries and Wages Expenses $7,920

Cr Salaries and Wages Payable $7,920

( 9 employees * $11 per hour * 8 hours per day * 10 days )

(Being to Record Accrue the expense and liability for Vacations)

2020

Dr Salaries and Wages Expenses$4,752

Cr Salaries and Wages Payable $4,752

(9 employees * $11 per hour * 8 hours per day * 6 days)

(Being to Record Accrue the expense and liability for Sick Pay)

2020

Dr Salaries and Wages Expenses $ 648

($7,128- $6,480)

Dr Salaries and Wages Payable $6,480

( 9 employees * $10 per hour * 8 hours per day * 9 days )

Cr Cash $7,128

(9 employees * $11 per hour * 8 hours per day * 9 days)

(Being to Record Vacation Time paid)

2020

Dr Salaries and Wages Expenses $ 144

($3,960-$3,816)

Dr Salaries and Wages Payable $3,816

[(9 employees * $10 per hour * 8 hours per day * 2 days )+(9 employees * $11 per hour * 8 hours per day * 3 days)]

Cr Cash $3,960

( 9 employees * $11 per hour * 8 hours per day * 5 days)

(Being to Record Sick Leave Paid)

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

1) Calculation for the Vacation Wages Payable at December 31, 2019

Vacation Wages Payable at December 31, 2019=$0 + $7,200 - $0

Vacation Wages Payable at December 31, 2019= $7,200

2). Calculation for Sick Pay Wages Payable at December 31, 2019

Sick Pay Wages Payable at December 31, 2019=$0 + $4,320 - $2,880

Sick Pay Wages Payable at December 31, 2019= $1,440

3) Calculation for Vacation Wages Payable at December 31, 2020

Vacation Wages Payable at December 31, 2020=$7,200 + $7,920 - $6,480

Vacation Wages Payable at December 31, 2020 = $8,640

4) Calculation for Sick Pay Wages Payable at December 31, 2020

Sick Pay Wages Payable at December 31, 2020=$1,440 + $4,752 - $3,816

Sick Pay Wages Payable at December 31, 2020

= $2,376

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