Question: As of December 31 2008 Delta Air Lines had the

As of December 31, 2008, Delta Air Lines had the following account listed as a current liability on its balance sheet:
Accrued salaries and related benefits........$1,367,000,000
The “related benefits” include the liability for vacation pay. Under the accrual basis of accounting, vacation pay is ordinarily accrued throughout the year as workers perform service and earn vacation. For example, suppose a Delta baggage handler earns $1,350 per week for 50 weeks and also gets paid $2,700 for 2 weeks’ vacation each year. Accrual accounting requires that the obligation for the $2,700 be recognized as it is earned instead of when the payment is disbursed. Thus, in each of the 50 work weeks, Delta would recognize a wage expense (or vacation pay expense) of ($2,700 ÷ 50) = $54.
1. Prepare Delta’s weekly adjusting journal entry called for by the $54 example.
2. Prepare the entry for the $2,700 payment of vacation pay.

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  • CreatedFebruary 20, 2015
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