A business provides its employees with varying amounts of vacation per year, dep

Question

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 $61,200. Required: a. Journalize the adjusting entry required on January 31, the end of the first month of the current year, to record the accrued vacation pay. Refer to the Chart of Accounts for exact wording of account titles. b. How is the vacation pay reported on the company’s balance sheet? When is this amount removed from the company’s balance sheet?

a. Journalize the adjusting entry required on January 31, the end of the first month of the current year, to record the accrued vacation pay. Refer to the Chart of Accounts for exact wording of account titles.

Instructions 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 $61,200 Required a. Journalize the adjusting entry required on January 31, the end of the first month of the current year, to record the accrued vacation pay. Refer to the Chart of Accounts for exact wording of account titles. b. How is the vacation pay reported on the company's balance sheet? When is this amount removed from the company's balance sheet?

Explanation / Answer

b. As a current liability, unless employees are allowed to accumulate their vacation pay for use in future use.

When employees take vacation

General Journal Debit Credit Vacation Pay Expense $5,100 Vacation Pay Payable ($61,200 × 1/12) $5,100

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