Buffalo Company began operations on January 2, 2016. It employs 12 individuals w

Question

Buffalo Company began operations on January 2, 2016. It employs 12 individuals who work 8-hour days and are paid hourly. Each employee earns 11 paid vacation days and 7 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. Sick Days Used by Each Employee Actual Hourly Vacation Days Used by Each Employee Wage Rate 2016 2017 2016 2017 2016 2017 ?? Buffalo 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 2016 and 2017. (If no entry is required, select "No Entry" for the account titles and enter o for the in amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation 2016 Debit Credit (To acorue the expense and liability for vacations) (To accrue the expense and liability for sick pay) To record payment for compensated time when used by employees)

Explanation / Answer

a) Journal Entries (Amounts in $)

b) 2016

Vacation Wages Payable = Beg. bal+Accrued-Paid

= $0+$7,392-$0 = $7,392

Sick Pay Wages Payable = Beg. bal+Accrued-Paid

= $0+$4,704-$3,360 = $1,344

2017

Vacation Wages Payable = Beg. bal+Accrued-Paid

= $7,392+$8,448-$6,720 = $9,120

Sick Pay Wages Payable = Beg. bal+Accrued-Paid

= $1,344+$5,376-$4,416 = $2,304

Date Account Titles and Explanation Debit Credit 2016 Salaries and Wages Expense (12 indiv.*11 days*8 hrs*$7) 7,392 Salaries and Wages Payable 7,392 (To record the expense and liability for vacations) 2016 Salaries and Wages Expense (12 indiv.*7 days*8 hrs*$7) 4,704 Salaries and Wages Payable 4,704 (To accrue the expense and liability for sick pay) 2016 Salaries and Wages Payable (12 indiv.*5 days*8 hrs*$7) 3,360 Cash 3,360 (To record payment for compensated time when used by employees) 2017 Salaries and Wages Expense (12 indiv.*11 days*8 hrs*$8) 8,448 Salaries and Wages Payable 8,448 (To record the expense and liability for vacations) 2017 Salaries and Wages Expense (12 indiv.*7 days*8 hrs*$8) 5,376 Salaries and Wages Payable 5,376 (To accrue the expense and liability for sick pay) 2017 Salaries and Wages Expense (7,680-6,720) 960 Salaries and Wages Payable (12 Indiv.*10 days*8 hrs*$7) 6,720 Cash (12 Indiv.*10 days*8 hrs*$8) 7,680 (To record vacation time paid) 2017 Salaries and Wages Expense (4,608-4,416) 192 Salaries and Wages Payable [(12*2*8 hrs*$7)+(12*4*8 hrs*$8)] 4,416 Cash (12 Indiv.*6 days*8 hrs*$8) 4,608 (To record sick leave paid)

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