Question

P1. Coyote Construction, Inc. provides paid vacations and paid sick leaves to its employees whose standard working hours are 8 hours a day per person. Each employee earns one day paid sick leave and one day paid vacation a month if he or she works full-time in the month. Vacations earned in one year can be used in the following years while sick leaves can be used as they are earned. The following information pertains to vacation earned in 2018 and 2019 and vacation used in 2019.

Vacations                    Vacations                                            Vacation earned

Earned in 2018             earned in 2018 and used in 2019          in 2019

200 days                      160days                                               240 days

The average pay rates are $15/hour in 2018 and $18/hour in 2019.

Instructions: prepare any necessary journal entries for

1. Vacations earned in 2018.
2. Vacations earned in 2018 and used in 2019.
3. Vacations earned in 2019

Answer 1

1- Vacations earned in 2018
Leave encashment expenses	Dr	24000
To Leave Encashment accrual	Cr	24000
2- Vacations earned in 2018 and used in 2019
Leave Encashment accrual	Dr	24000
To Leave Encashment expenses	Cr	24000
Leave encashment expenses	Dr	19200
To Bank a/c	Cr	19200
Leave encashment expenses	Dr	4800
To Leave Encashment accrual	Cr	4800
3- Vacations earned in 2019
Leave Encashment accrual	Dr	28800
To Leave Encashment expenses	Cr	28800