JWS Transport Companys employees earn vacation time at the rate of 1 hour per 40
ID: 2346625 • Letter: J
Question
JWS Transport Companys employees earn vacation time at the rate of 1 hour per 40-hour work period. The vacation pay vests immediately (that is, an employee is entitled to the pay even if employment terminates). During 2011, total wages paid to employees equaled $404,000, including $4,000 for vacations actually taken in 2011 but not including vacations related to 2011 that will be taken in 2012. All vacations earned before 2011 were taken before January 1, 2011. No accrual entries have been made for the vacations. No over-time premium and no bonuses were paid during the period.Prepare the appropriate adjusting entry for vacations earned but not taken in 2011.
Explanation / Answer
1 hr per 40 hour period= 1/40=.025
Total Wages paid less vacation wages paid ($404,000-$4000)
$400,000 is the amount of wages that would be paid if no vacations were taken.
So: $400,000 X.025=$10000=(total vacation pay for all employees)
$10,000-$4,000=$6,000
Dr.Wages Expense....$6,000
Cr. Liability future absences...$6,000
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