Exercise 133 Whispering Company began operations on January

Exercise 13-3 Whispering Company began operations on January 2, 2016. It employs 10 individuals who work 8-hour days and are paid hourly. Each employee earns 10 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.

Actual Hourly Wage Rate Vacation Days Used by Each Employee Sick Days Used by Each Employee

2016 2017 2016 2017 2016 2017

$6 $7 0 9 6 7

Whispering 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.

Prepare journal entries to record transactions related to compensated absences during 2016 and 2017. (If no entry is required, select \"No Entry\" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date

Account Titles and Explanation

Debit

Credit

2016

(To accrue the expense and liability for vacations)

(To accrue the expense and liability for sick pay)

(To record payment for compensated time when used by employees)

2017

(To accrue the expense and liability for vacations)

(To accrue the expense and liability for sick pay)

(To record vacation time paid)

(To record sick leave paid)

Compute the amounts of any liability for compensated absences that should be reported on the balance sheet at December 31, 2016 and 2017.

2016

2017

Solution

**vacation time is paid at current wage rate of employees .so vacation paid = 10 employees*8 hours*9 leaves*7 rate= 5040

accrual of vacation time : 10 employees *8 hours *9leaves*6 rate=4320

***To pay sick leaves : [10employees*8hours*7 leaves*7rate]=3920.for making payment ,we use first in first out method.

in 2016 ,sick leaves unused per employee :8-6taken =2

Balance in sick leaves payable at 2016 = 960

current Sick leaves taken = 7- 2 leaves taken from 2016=5 leaves.

current expense :10employees*8hours*5leaves*7 rate=2800

Total payment made out of accrued expense = 2800+960= 3760

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