Asked by Alyssa E McVey on Jul 09, 2024
Verified
Employees earn vacation pay at a rate of one day per month.The company estimated and must expense $1,500 of accrued vacation benefits for the year.Which of the following is the necessary year-end adjusting entry to record accrued vacation benefits?
A) Debit Vacation Benefits Expense $1,500; credit Prepaid Vacation $1,500.
B) Debit Vacation Benefits Expense $1,500; credit Vacation Benefits Payable $1,500.
C) Debit Payroll Tax Expense $1,500; credit Payroll Taxes Payable $1,500.
D) Debit Prepaid Vacation Benefits $1,500; credit Vacation Benefits Payable $1,500.
E) Debit Prepaid Benefits Payable $1,500; credit Vacation Benefits Expense $1,500.
Accrued Vacation Benefits
The amount of vacation time earned by employees but not yet taken or paid out, often recorded as a liability on the employer's balance sheet.
Adjusting Entry
An accounting entry made in the general ledger to update the book values of assets, liabilities, revenues, and expenses at the end of an accounting period.
- Absorb the concept of estimated liabilities and identify ordinary classifications.
- Detail the procedures and significance of employee benefits and understand their accounting treatment.
Verified Answer
SS
Satwinder SinghJul 13, 2024
Final Answer :
B
Explanation :
The necessary year-end adjusting entry to record accrued vacation benefits is to debit Vacation Benefits Expense $1,500 and credit Vacation Benefits Payable $1,500. This is because the company estimated and must expense $1,500 of accrued vacation benefits for the year, which means that employees have earned vacation pay that they have not yet been paid for. Therefore, the company owes them vacation pay and needs to record a liability for that amount.
Learning Objectives
- Absorb the concept of estimated liabilities and identify ordinary classifications.
- Detail the procedures and significance of employee benefits and understand their accounting treatment.