Aloha Company has a personnel policy that allows each employee with at least one year's employment, 20 days vacation time and two holidays with regular pay. Unused days are carried over to the next year. If not taken during the next year, the vacation and holiday times are lost. Aloha's accounting period ends December 31.

At the end of 2020, the personnel records showed the following:

During 2021, all of the 2020 vacation time that was carried over and eight days of the holiday time that was carried over were taken. Salary increases in 2021 for these employees relating to the days carried over amounted to \(\$ 1,600\). Total cash wages paid were: \(2020, \$ 1,780,000\); and \(2021, \$ 1,860,000\). There was no carryover of vacation time earned in 2021.

Required

a. Provide all of the entries for Aloha Company related to salaries and compensated absences during 2020 and 2021. Disregard payroll taxes.

b. Show how the effects of the above transactions should be reported in the 2020 and 2021 financial statements of Aloha.

Transcribed Image Text:

Vacations Carried Over to 2021 Total Days 70 Total Salaries $16,800 Holidays Carried Over to 2021 Total Days Total Salaries 10 $2,580