Reference no: EM131266435
McConnell Company's employees earn vacation time at the rate of 1 hour per 40-hour work period. The vacation pay vests immediately, meaning an employee is entitled to the pay even if employment terminates. During 2016, total wages paid to employees equaled $808,000, including $8,000 for vacations actually taken in 2016, but not including vacations related to 2016 that will be taken in 2017. All vacations earned before 2016 were taken before January 1, 2016. No accrual entries have been made for the vacations.
During February McConnell paid $80,000 for wages. All of the wages were within the social security cap but only $35,000 was within the unemployment wage cap. Appropriate applicable percentages are: FICA (social security) 6.2%, Medicare 1.45%, federal unemployment tax 0.8%, state unemployment tax 5.4%. McConnell matches retirement savings of up to 5% (only 4% was actually contributed by the employees). Employee union dues were $2,000 for February. McConnell pays 80% of employee health insurance which ran $16,000 in February. McConnell withheld $16,000 for federal income tax and $3,000 for state income tax.
A. Prepare the appropriate adjusting entry for vacations earned but not taken in 2016.
B. Prepare the appropriate February 2016 summary payroll (and related) journal entries.
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