Cullumber Co. began operations on January 2, 2020. It employs 15 people who work 8-hour days. Each employee earns 11 paid vacation days annually. Vacation days may be taken after January 10 of the year following the year in which they are earned. The average hourly wage rate was $18 in 2020 and $19.50 in 2021. The average vacation days used by each employee in 2021 was 10. Cullumber Co. accrues the cost of compensated absences at rates of pay in effect when earned Prepare journal entries to record the transactions related to paid vacation days during 2020 and 2021.

Answer and Explanation:

The Journal entries are shown below:

On 2020,

Wages expense Dr. $23,760(15 × 8 hrs × 11 days × $18)

     To vacation wages payable  $23,760

(To record the wages expense)

On 2021

Wages expense Dr $1,800

Vacation wages payable $21,600 (15 × 8 hrs × 10 days × $18)

         To Cash $23,400 (15 × 8 hrs × 10 days × $19.50)

(To record the cash paid)

Wages expense Dr.$25,740 (15 × 8 hrs × 11 days × $19.50)

     To vacation wages payable  $25,740

(To record the wages expense)

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