Question

Chavez company's salaried employees earn four weeks' vacation per year. Chavez estimated and must expense 8,000 of accrued vacation benefits for the year. (a) Prepare the December 31 year-end adjusting entry for accrued vacation benefits. (b) Prepare the entry on April 1 of the next year when an employee takes a one-week vacation and is paid 500 cash for that week.

Answer 1

The question requires creating journal entries to account for accrued vacation benefits at the fiscal year-end and when an employee takes a vacation. The year-end entry accounts for the total accrued vacation liability, and the subsequent entry reflects the actual cash payment to the employee for their vacation time.

Step-by-step explanation:

The question involves accounting for accrued vacation benefits and recording the vacation time taken by an employee in the next fiscal year for a company, which pertains to financial statements and adjusting entries in accounting, a subset of the business field. The required journal entries are as follows:

December 31 Year-End Adjusting Entry for Accrued Vacation Benefits

Dr Vacation Expense 8,000

Cr Accrued Vacation Payable 8,000

(To record the accrual of vacation benefits for the year.)

Entry on April 1 When an Employee Takes One Week Vacation

Dr Accrued Vacation Payable 500

Cr Cash 500

(To record the payment for an employee's one-week vacation.)

Note: The amounts should have the currency symbol before them, such as $, if needed as per the financial regulations of the country in which the company operates.