Reference no: EM132884881
Question -
Part A - The Mai Anh Tong Company began operations on January 1, 20X7. It employs forty individuals who work eight-hour days and are paid hourly. Each employee earns 15 paid vacation days and 10 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:
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Actual Hourly Wage Rate
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Vacation Days Used by Each Employee
|
Sick Days Used by Each Employee
|
|
20X7
|
20X8
|
20X7
|
20X8
|
20X7
|
20X8
|
|
$8.00
|
$9.00
|
0
|
12
|
6
|
8
|
The Mai Anh Tong 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.
Required -
1. Prepare journal entries to record transactions related to compensated absences during 20X7 and 20X8.
2. Calculate the amounts of any liability for compensated absences that should be reported on the balance sheet as at December 31, 20X8.
Part B - Assume the facts in the preceding as in Part A, except that the Mai Anh Tong 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 uses the following projected rates to accrue vacation time:
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Year in Which Vacation Projected Future Pay Rates
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Time Was Earned Used to Accrue Vacation Pay
|
|
20X7
|
$8.50
|
|
20X8
|
9.50
|
Required -
1. Prepare the required compound journal entries to record transactions related to compensated absences during 20X7 and 20X8.
2. Calculate the amounts of any liability for compensated absences that should be reported on the balance sheet as at December 31, 20X8.