Matt Broderick Company began operations on January 2, 2013. It employs 9 individuals who work 8

| June 11, 2016

Question
Matt Broderick Company began operations on January 2, 2013. It employs 9 individuals who work 8

E13-5 (Compensated Absences) Matt Broderick Company began operations on January 2, 2013. It employs 9 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

2013

2014

2013

2014

2013

2014

$10

$11

0

9

4

5

Matt Broderick 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.

Instructions

(a)(1) Prepare journal entries to record transactions related to compensated absences during 2013.

(a)(2) Prepare journal entries to record transactions related to compensated absences during 2014.

NOTE: Vacation days and sick days are paid at the employee’s current wage. Also, if employees earn vacation pay at different pay rates, a consistent pattern of recognition (e.g., first-in, first-out) could be employed which liabilities have been paid.

(b) Compute the amounts of any liability for compensated absences that should be reported on the balance sheet at December 31, 2013, and 2014.

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