Mustafa Limited began operations on January 2, 2016. Mustafa employs nine individuals who work eight-hour days and
Question:
Mustafa Limited has chosen to accrue the cost of compensated absences at rates of pay in effect during the period when they are earned and to accrue sick pay when it is earned. For the purpose of this question, ignore any tax, CPP, and EI deductions when making payments to the employees.
Instructions
(a) Prepare the journal entry(ies) to record the transactions related to vacation entitlement during 2016 and 2017.
(b) Prepare the journal entry(ies) to record the transactions related to sick days during 2016 and 2017.
(c) Calculate the amounts of any liability for vacation pay and sick days that should be reported on the statement of financial position at December 31, 2016 and 2017.
(d) How would your answers to parts (b) and (c) change if the entitlement to sick days did not accumulate?
Step by Step Answer:
Intermediate Accounting
ISBN: 978-1119048541
11th Canadian edition Volume 2
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy