Question

Splish Company began operations on January 2, 2019. It employs 12 individuals who work 8-hour days and are paid hourly. Each employee earns 10 paid vacation days and 6 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 2019 2020 2019 2020 2019 2020 $6 $7 0 9 4 5
Splish 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.
Prepare journal entries to record transactions related to compensated absences during 2019 and 2020.
vacation Days Used by Each Employc 2019 Actual Hourly Sick Days Used by Each Employcoc 017 Wagc Ratc 2019 2020. 01 7 2019 57 58

Answer 1

Answer: what is the question being asked?

Answer 2

Splish Company accrued and paid vacation and sick leave for its employees in 2019 and 2020 based on their hourly rates and earned days.

How is that so?

Below is the Journal Entry:

Journal Entries for Splish Company's Compensated Absences

2019:

1. Accrue vacation pay (December 31, 2019):

• Debit: Salaries and Wages Expense ($6/hour x 8 hours/day x 10 days/employee x 12 employees = $5,760)
• Credit: Salaries and Wages Payable ($5,760)

This entry recognizes the liability for vacation time earned by employees in 2019 but not yet taken.

2. Record sick leave paid (throughout 2019):

• Debit: Salaries and Wages Expense ($6/hour x 8 hours/day x 4 days = $192)
• Credit: Cash ($192)

This entry records the payment of sick leave used by an employee in 2019.

3. Record vacation pay paid (after January 15, 2020, for accrued vacation in 2019):

• Debit: Salaries and Wages Expense ($5,760)
• Credit: Salaries and Wages Payable ($5,760)

This entry transfers the accrued vacation liability to the expense account when employees use their earned vacation days.

2020:

1. Accrue vacation pay (December 31, 2020):

• Debit: Salaries and Wages Expense ($7/hour x 8 hours/day x 10 days/employee x 12 employees = $6,720)
• Credit: Salaries and Wages Payable ($6,720)

This entry recognizes the liability for vacation time earned by employees in 2020 but not yet taken.

2. Record sick leave paid (throughout 2020):

• Debit: Salaries and Wages Expense ($7/hour x 8 hours/day x 5 days = $280)
• Credit: Cash ($280)

This entry records the payment of sick leave used by an employee in 2020.

3. Record vacation pay paid (after January 15, 2021, for accrued vacation in 2020):

• Debit: Salaries and Wages Expense ($6,720)
• Credit: Salaries and Wages Payable ($6,720)

This entry transfers the accrued vacation liability to the expense account when employees use their earned vacation days.