?Matt Broderick Company began operations on January 2, 2013. It employs 12 indiv

Question

?Matt Broderick Company began operations on January 2, 2013. It employs 12 individuals who work 8-hour days and are paid hourly. Each employee earns 13 paid vacation days and 8 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.

SEE SCREENSHOT

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 following projected rates to accrue vacation time

Prepare journal entries to record transactions related to compensated absences during 2013 and 2014.

Sick Days Used by Each Employee Actual Hourly Vacation Days Used by Each Employee Wage Rate 2013 2014 2013 2014 2013 2014 $15 $18 0 12 5 6 Matt Broderick Company has chosen not to accrue paid sick leave until used, and has chosen to accrue rates of pay without discounting. The company used the following projected rates to accrue vacation tim Year in Which Vacation Time Was Earned 2013 2014 Projected Future Pay Rates Used to Accrue Vacation Pay $%17 18 Prepare journal entries to record transactions related to compensated absences during 2013 and 2014.

Explanation / Answer

2013

1.To accrue expense and liability for vacations

(12x8x13x17)

Salaries and Wages Expense A/c Dr.                        21216

To Salary and Wages Payable A/c 21216

(Being accrued expense and liability for vacations recorded)

2.To accrue expense and liability for sick pay#

(12x8x5x15)

Salaries and Wages Expense A/c Dr.                       7200      

To Salaries and Wages Payable A/c 7200

(Being liability for sick pay recorded)

3.To record sick leave paid

Salaries and Wages Payable A/c Dr.                         7200

                To Cash A/c                                                                        7200

(Being Sick leave Paid)

2014

1.To accrue expense and liability for vacations

(12x8x13x18)

Salaries and Wages Expense A/c Dr.                        22464

To Salary and Wages Payable A/c 22464

(Being accrued expense and liability for vacations recorded)

2.To accrue expense and liability for sick pay

(12x8x6x18)

Salaries and Wages Expense A/c Dr.                       8640      

To Salaries and Wages Payable A/c 8640

(Being liability for sick pay recorded)

3.To record sick leave paid

(12*8*6*18)

Salaries and Wages Payable A/c Dr.                         8640

                To Cash A/c                                                                        8640

(Being Sick leave Paid)

4.To record vacation time paid

(12x8x12x18)

Salaries and Wages Payable A/c Dr.                         20736

To Cash A/c 20736

(Being Vacation time paid)

5.To record reversal of Vacation leave expense booked in exces last year

(21216-20736)

Salaries and Wages Payable A/c Dr.                         480                        

                To Profit & Loss A/c                                                         480

(Being Excess expense recorded reversed)*

*Note- There can be alternative treatment for this entry by adjusting the same with current year expense recorded.

# The sick leave expense are taken on actual liability since they are not accrued by the company.

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