Question

Martin services company provides its employees vacation benefits and a defined contribution pension plan. employees earned vacation pay of $46,000 for the period. the pension plan requires a contribution to the plan administrator equal to 9% of employee salaries. salaries were $500,000 during the period.

Journalize the entry for the vacation pay.
A) Salaries Expense $46,000; Vacation Payable $46,000
B) Vacation Payable $46,000; Cash $46,000
C) Vacation Payable $46,000; Salaries Expense $46,000
D) Cash $46,000; Vacation Payable $46,000

Answer 1

The correct journal entry to record the vacation pay earned by employees is to debit Salaries Expense for $46,000 and credit Vacation Payable for $46,000. This entry reflects the accrual of vacation pay as a liability for Martin Services Company.

Step-by-step explanation:

To journalize the entry for the vacation pay that Martin Services Company provides to its employees, you need to recognize the expense when the employees earn the vacation pay, not when it is paid out. Since the employees earned vacation pay of $46,000 for the period, the journal entry would debiting (increasing) the expense account and crediting (increasing) the liability account. The correct journal entry is therefore:

Salaries Expense: $46,000
Vacation Payable: $46,000

This entry reflects the cost incurred by the company for the employees' accrued vacation time. It increases the Salaries Expense account for the amount of the vacation earned by the employees and also records a corresponding liability (Vacation Payable), reflecting the amount the company owes to its employees for this benefit.