Chapter 11, Problem 11.16EX

a.

To determine

Vacation expense: Vacation expense is an estimated expense for the company which the company should pay to the employees as extra salary over the entire year. For example: If an employee works 49 weeks in a year, company should pay 3 weeks’ $\left(\text{52 weeks }–\text{ 49 weeks}\right)$

extra salary as a vacation expense.

To journalize: The adjusting entry to record the accrued vacation pay.

b.

To determine

To explain: how vacation pay is reported on the company’s balance sheet and when it is removed from the company’s balance sheet.