Waterway Incorporated began operations on January 2, 2016. Waterway employs 5 individuals who work 8-hour days and are paid hourly. Each employee earns 12 paid vacation days and 5 paid sick days annually. Vacation days may be taken after February 28 of 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: 2016-$10.00 - 2017-$11
Vacation Days Used by each employee - 2016-0 days and 2017-9 days
Sick Days Used by Each Employee - 2016 -4 days and 2017 5 days
Assume the facts above except that Matt Broderick Company has chosen not to accrue paid sick leave until used, and has chosen to accrue vacation time at expected future rates of pay without discounting. The company used the following projected rates to accrue vacation time.
yr vacation was earned - 2016 rate of pay $10.75
yr vacation was earned - 2017 rate of pay $11.60
Instructions: prepare journal entries to record transactions related to compensated absences during 2016 & 2017
Compute the amounts of any liability for compensated absences that should be reported on the balance sheet at December 31, 2016 and 2017.