Paid future absences • LO13–3 JWS Transport Company’s 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 2018, total wages paid to employees equaled $404,000, including $4,000 for vacations actually taken in 2018 but not including vacations related to 2018 that will be taken in 2019. All vacations earned before 2018 were taken before January 1, 2018. No accrual entries have been made for the vacations. No overtime premium and no bonuses were paid during the period. Required: Prepare the appropriate adjusting entry for vacations earned but not taken in 2018.
Paid future absences • LO13–3 JWS Transport Company’s 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 2018, total wages paid to employees equaled $404,000, including $4,000 for vacations actually taken in 2018 but not including vacations related to 2018 that will be taken in 2019. All vacations earned before 2018 were taken before January 1, 2018. No accrual entries have been made for the vacations. No overtime premium and no bonuses were paid during the period. Required: Prepare the appropriate adjusting entry for vacations earned but not taken in 2018.
Solution Summary: The author explains that vacation pay is an accrued cost estimated for the company and is liability for employer.
JWS Transport Company’s 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 2018, total wages paid to employees equaled $404,000, including $4,000 for vacations actually taken in 2018 but not including vacations related to 2018 that will be taken in 2019. All vacations earned before 2018 were taken before January 1, 2018. No accrual entries have been made for the vacations. No overtime premium and no bonuses were paid during the period.
Required:
Prepare the appropriate adjusting entry for vacations earned but not taken in 2018.
Definition Definition Assets available to stockholders after a company's liabilities are paid off. Stockholders’ equity is also sometimes referred to as owner's equity. A stockholders’ equity or book value generally includes common stock, preferred stock, and retained earnings and is an indicator of a company's financial strength.
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