Question

Bailey Corporation began business on January 2, 2019, with five employees. Its sick leave and vacation policy follow: Each employee is allowed 8 days of sick leave each year and one day of paid vacation leave for each month worked. The accrued vacation cannot be taken until the employee has been with the company 1 year. The sick leave, if not used accumulates to an 18- day maximum. The vacation leave accumulates for 5 years, but at any time the employee may request compensation in lieu of taking paid vacation leave. The company records its liability for both compensated absences on a quarterly basis. The daily gross wages for each employee are $180. Instructions: 1. Prepare the journal entries to record the compensated absences for the first quarter of 2019. Three sick days were used by employees in the first quarter. 2. Prepare a partial interim balance sheet showing the liability balances for compensated absences at March 31, 2019.

Answer 1

Answer:

Answer is explained in the explanation section below.

Explanation:

Given Data:

Business Began on = 2, January, 2019

Number of employees = 5

Sick leaves and vacation Policy:

Allowed Sick Leaves for each employee = 8 days/year

Paid Leave = 1 day/Month worked

Accrued Vacation condition = Worked for company for at least 1 year

Sick leaves if not used = 18 days accumulated.

Daily Gross Wages = $180 for each employee.

Part 1:

So, we know that,

The company records its liability to compensated absences for both sick leave.

on quarterly basis (5 x 2 = 10 days).

pay per each employ = $180.

The company records its liability to compensated absences for both sick leave.

On quarterly basis = 10 x 180 = $1800.

In a quarter each employee is allowed to avail 3 vacation days, so the total vacations days for 5 employees for a quarter 3 x 5=15 days

gross wage for each employee is $180 per day

for vacation days= 15 x 180= $2700

To record this transaction the journal entry is:

wages expenses             $2700

Accumulated wages        $2700

Part 2:

The partial interim balance compensation for future absences at March 31, 2019

= $1800 + $2700

= $4500.