Refer to the data in E13-10 and assume instead that Mustafa Limited has chosen not to recognize paid sick leave until it is used, and has chosen to accrue vacation time at expected future rates of pay without discounting. The company uses the following projected rates to accrue vacation time:

Year in Which Vacation Time             Projected Future Pay Rates Used

Was Earned                                            to Accrue Vacation Pay

2013 ..................................................... $10.75 per hour

2014 ..................................................... $11.60 per hour

Instructions

(a) Prepare the journal entry(ies) to record the transactions related to vacation entitlement during 2013 and 2014.

(b) Prepare the journal entry(ies) to record the transactions related to sick days during 2013 and 2014.

(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, 2013, and 2014.

Data From E13-10

Mustafa Limited began operations on January 2, 2013.
The company employs nine individuals who work eight-hour days and are paid hourly. Each employee earns 10 paid vacation days and six paid sick days annually. Vacation days may be taken after January 15 of the year following 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:

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.

Vacation Days Used by Each Employee 2014 Sick Days Used by Each Employee Actual Hourly Wage Rate 2014 2013 2013 2014 2013 5 $10 $1