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Journal Entries and Liability Related to E13-2 (Accounts and notes payable) and E13-5(Compensated Absences).

E13-2 (Accounts and notes payable) and E13-5(Compensated Absences)

(E13-2)The following are selected 2012 transaction of Darby Corporation.
Sept 1: Purchase inventory from Orion Company on account for 50,000.Darby records purchases gross and uses a periodic inventory system.

Oct 1: Issues a 50,000,12 month,8% note to Orion in payment of account.

Oct 1: Borrowed 75,0000 from the Store Bank by signing a 12-month ,zero-interest -bearing 81,000 note

(E13-5) Matthewson company began operation on Jan 2,2012.It employs 9 individuals who work 8 hour days and are paid hourly.Each employee earns 10 paid vacation days and 6 paid sick days annually.Vacation days may be taken after Jan 15 of the year following the year in which they earned ,Sick days may be taken as soon as they are earned ;unused sick days accumulate.Additional information is as follows
Actually Hourly wage rate. 2012- $12 , 013--$13
Vacation days used by each employee. 2012 - 0 , 2013 - 9
Sick days used by each employee. 2012- 4 , 2013 - 5

Matthewson Company has chosen to accrue the cost of compensation absences at rates of pay in effect during the period when earned and to accrue sick pay when earned.

(a) Prepare Journal entries to record transaction related to compensated absences during 2012 and 2013.
(b) Compute the amount of any liability for compensated absences that should be reported on the balance sheet at Dec 31,2012 and 2013.

Solution Summary

Your tutorial is attached showing how to get the note and payroll liabilities. If you click in the cells, I have put all the computations in clearly so you can study the worked-out example and learn how to do it for yourself.