Question

at the end of april, hernandez company had a balance of $35,180 in the vacation benefits payable account. during may, employees earned an additional $2,830 in vacation benefits, but some employees used vacation days that amounted to $2,160 of the vacation benefits. the $2,160 was charged to wages expense when it was paid in may. what adjusting entry would hernandez company make at the end of may to bring the vacation benefits payable account up to date?

Answer 1

Hernandez Company needs to make an adjusting entry at the end of May to recognize the additional $2,830 in vacation benefits earned, which involves debiting Vacation Benefits Expense and crediting Vacation Benefits Payable by the same amount.

Step-by-step explanation:

To update the vacation benefits payable account at the end of May, Hernandez Company needs to recognize additional vacation benefits earned during the month and also account for the vacation benefits paid out. The beginning balance of vacation benefits payable was $35,180. During May, employees earned an additional $2,830 in vacation benefits, which increases the liability. However, the company paid out $2,160 for vacations taken, which decreases the liability. The adjusted entry would therefore be a debit to the vacation benefits expense for the additional benefits earned ($2,830) and a credit to the vacation benefits payable account for the same amount, reflecting the increase in the liability due to the earned vacation benefits.

The adjusting entry at the end of May would be:

• Debit Vacation Benefits Expense: $2,830
• Credit Vacation Benefits Payable: $2,830

This entry does not include the vacation benefits that were paid out, as those were already recorded when paid ($2,160 charged to wages expense).