Financial Accounting notes
JWS Transport Company’s employees earn vacation time at the rate of 1 hour per 40-hour work period. The vacation pay vests immediately (that is, an employee is entitled to the pay even if employment terminates). During 2013, total wages paid to employees equaled $404,000, including $4,000 for vacations actually taken in 2013 but not including vacations related to 2013 that will be taken in 2014. All vacations earned before 2013 were taken before January 1, 2013. No accrual entries have been made for the vacations. No overtime premium and no bonuses were paid during the period. Prepare the appropriate adjusting entry for vacations earned but not taken in 2013: Wages Expense 6k, Liability- Compensated future absences 6k
Explanation:
Wages expense (increases wages expense to $410k= $6k
Liability- compensated future absences
(404k – 4k)= $400k non-vacation wages
X 1/40 = $10k vacation pay earned - ($4k) vacation time taken
= $6000 vacation pay carried over
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Cupola Awning Corporation introduced a new line of commercial awnings in 2013 that carry a two-year warranty against manufacturer’s defects. Based on their experience with previous product introductions, warranty costs are expected to approximate 3% of sales. Sales and actual warranty expenditures for the first year of selling the product were: Sales $5,560,000, Actual Warranty Expenditures: $59,250. This represents a loss contingency. Estimated warranty liability is credited and warranty expense is debited in 2013. Liability at Dec 31 is $107,550 Journal entries:
AR $5,560,000, Sales $5,560,000
Warranty expense $166,800, Est. warranty liability $166,800
Est. warranty liability $59,250
Cash, wages payable, parts and supplies, etc $59,250
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The Commonwealth of Virginia filed suit in October 2011 against Northern Timber Corporation, seeking civil penalties and injunctive relief for violations of environmental laws
Explanation:
Wages expense (increases wages expense to $410k= $6k
Liability- compensated future absences
(404k – 4k)= $400k non-vacation wages
X 1/40 = $10k vacation pay earned - ($4k) vacation time taken
= $6000 vacation pay carried over
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Cupola Awning Corporation introduced a new line of commercial awnings in 2013 that carry a two-year warranty against manufacturer’s defects. Based on their experience with previous product introductions, warranty costs are expected to approximate 3% of sales. Sales and actual warranty expenditures for the first year of selling the product were: Sales $5,560,000, Actual Warranty Expenditures: $59,250. This represents a loss contingency. Estimated warranty liability is credited and warranty expense is debited in 2013. Liability at Dec 31 is $107,550 Journal entries:
AR $5,560,000, Sales $5,560,000
Warranty expense $166,800, Est. warranty liability $166,800
Est. warranty liability $59,250
Cash, wages payable, parts and supplies, etc $59,250
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The Commonwealth of Virginia filed suit in October 2011 against Northern Timber Corporation, seeking civil penalties and injunctive relief for violations of environmental laws