(L01) (Compensated Absences) Matt Broderick Company began operations on January 2, 2016. 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 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.

Exercises 693 it will cost $1,000,000 to dismantle and remove the platform at the end of its useful life in 10 years. (The fair value at January 1, 2018, of the dismantle and removal costs is $450,000.) Prepare the entry to record the asset retirement obligation.

BE13-13 (L03) Streep Factory provides a 2-year warranty with one of its products which was first sold in 2017. Streep sold

$1,000,000 of products subject to the warranty. Streep expects $125,000 of warranty costs over the next 2 years. In that year, Streep spent $70,000 servicing warranty claims. Prepare Streep’s journal entry to record the sales (ignore cost of goods sold) and the December 31 adjusting entry, assuming the expenditures are inventory costs.

BE13-14 (L03) Leppard Corporation sells DVD players. The corporation also offers its customers a 4-year warranty contract.

During 2017, Leppard sold 20,000 warranty contracts at $99 each. The corporation spent $180,000 servicing warranties during 2017. Prepare Leppard’s journal entries for

(a) the sale of contracts,

(b) the cost of servicing the warranties, and

(c) the recognition of warranty revenue. Assume the service costs are inventory costs.

BE13-15 (L03) Wynn Company offers a set of building blocks to customers who send in 3 UPC codes from Wynn cereal, along with 50¢. The block sets cost Wynn $1.10 each to purchase and 60¢ each to mail to customers. During 2017, Wynn sold 1,200,000 boxes of cereal. The company expects 30% of the UPC codes to be sent in. During 2017, 120,000 UPC codes were redeemed. Prepare Wynn’s December 31, 2017, adjusting entry.

Actual Hourly Vacation Days Used Sick Days Used Wage Rate by Each Employee by Each Employee 2016 2017 2016 2017 2016 2017

$10 $11 0 9 4 5 Matt Broderick Company has chosen to accrue the cost of compensated absences at rates of pay in effect during the period when earned and to accrue sick pay when earned.

Instructions

(a) Prepare journal entries to record transactions related to compensated absences during 2016 and 2017.

(b) Compute the amounts of any liability for compensated absences that should be reported on the balance sheet at December 31, 2016 and 2017.