Question

Sweet Company began operations on January 2, 2016. It employs 10 individuals who work 8-hour days and are paid hourly. Each employee earns 9 paid vacation days and 7 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
$12			$13			0		8		5		6

Sweet 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.

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
Vacation Wages Payable		$		$
Sick Pay Wages Payable		$		$

Answer 1

Computation of Vacation wages payable
				2016	2,017
Beginning balance Accumulated vacation days	0	90
Add: Allowed during the year (10*9)	90	90
Total				90	180
Less: availed			0	80	(8*10)
Vcation days accumulated		90	100
Multiply: Wages rate per hour		12	13
Vacation Wages payable		1,080	1300
Computation of Sick pay wages payable
				2016	2,017
Beginning Accumulated sick days	0	20
Add: Allowed during the year (10*7)	70	70
Total				70	90
Less: availed		(5*10)	50	60	(6*10)
Sick days payable			20	30
Multiply: Wages rate per hour		12	13
Sick pay wages payable		240	390