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 $63,600.
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Required: |
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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.* |
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b. How is the vacation pay reported on the company’s
balance sheet? (options: current asset, expense, current
liability or long-term liability, unless employees are allowed
to accumulate their vacation pay for use in the future)
When is this amount removed from the company’s balance
sheet? (options: when employees take vacation, never, when
the accounting period ends or when employees are paid)
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| CHART OF ACCOUNTS |
|
| General Ledger |
|
ASSETS |
| 110 |
Cash |
| 111 |
Accounts Receivable |
| 112 |
Interest Receivable |
| 113 |
Notes Receivable |
| 115 |
Inventory |
| 116 |
Supplies |
| 118 |
Prepaid Insurance |
| 120 |
Land |
| 123 |
Building |
| 124 |
Accumulated Depreciation-Building |
| 125 |
Office Equipment |
| 126 |
Accumulated Depreciation-Office Equipment |
|
LIABILITIES |
| 210 |
Accounts Payable |
| 213 |
Interest Payable |
| 214 |
Notes Payable |
| 215 |
Salaries Payable |
| 216 |
Social Security Tax Payable |
| 217 |
Medicare Tax Payable |
| 218 |
Employees Federal Income Tax Payable |
| 219 |
Employees State Income Tax Payable |
| 221 |
Retirement Savings Deductions Payable |
| 224 |
Federal Unemployment Tax Payable |
| 225 |
State Unemployment Tax Payable |
| 226 |
Vacation Pay Payable |
| 227 |
Unfunded Pension Liability |
| 228 |
Product Warranty Payable |
|
EQUITY |
| 310 |
Common Stock |
| 311 |
Retained Earnings |
| 312 |
Dividends |
| 313 |
Income Summary |
|
|
REVENUE |
| 410 |
Sales |
| 610 |
Interest Revenue |
|
EXPENSES |
| 510 |
Cost of Goods Sold |
| 520 |
Salaries Expense |
| 524 |
Depreciation Expense-Building |
| 525 |
Delivery Expense |
| 526 |
Repairs Expense |
| 529 |
Selling Expenses |
| 531 |
Rent Expense |
| 532 |
Depreciation Expense-Office Equipment |
| 533 |
Insurance Expense |
| 534 |
Supplies Expense |
| 535 |
Payroll Tax Expense |
| 536 |
Vacation Pay Expense |
| 537 |
Pension Expense |
| 538 |
Cash Short and Over |
| 539 |
Product Warranty Expense |
| 540 |
Miscellaneous Expense |
| 710 |
Interest Expense |
|