Question: PROBLEM 5 - ACCOUNTING FOR VACATION AND SICK PAY (20 marks) Miramar limited began operations on January 4nd, 2020. The company employs 2,000 individuals who

PROBLEM 5 - ACCOUNTING FOR VACATION AND SICK PAY (20 marks)

Miramar limited began operations on January 4nd, 2020. The company employs 2,000 individuals who work 8 hours/day and are paid hourly. Each employee earns 15 paid vacation days and 10 paid sick days annually. Sick days may be taken as soon as they are earned, while vacation days may be taken in the following year in which they are earned. Miramar limited accrues the cost of compensated vacation absences using the compensation rates effective during the year in which they are earned. However, the cost of the compensated sick absences is recognized when these are used.

Actual Hourly Vacation days used by Sick days used by

Wage rate Each employee Each employee

2020 2021 2020 2021 2020 2021

$20 $24 0 12 3 5

Instruction

1. Prepare the journal entries to record the transactions related to vacation entitlement during 2020 and 2021

2. Prepare the journal entries to record the transactions related to sick pay during 2020

3. How the liability for vacation pay and sick days should be reported on the Balance Sheet as at December 31, 2020 and 2021.

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