Prolong Inc. permits employees to earn 20 fully paid vacation days each year. Unused vacation time can be carried over to the next year. However, if not taken during the following year, it is lost. By the end of 20X7, five employees had not taken their earned vacation days. The vacation days carried over per Prolong Inc.’s policy and represented a total 20X7 salary of $10,000. During 20X8, all five employees used their 20X7 vacation carryover. Total salaries paid in cash in 20X7 were $1,400,000 and in 20X8 $1,790,000. Prolong Inc. has a 31 December year-end.

Required:
1. Provide the entries that Prolong Inc. should record related to vacations during 20X7 and 20X8. You may disregard payroll taxes to simplify your analysis.
2. How would your entry differ during 20X8 if only part of the carried-over vacation time were taken and paid?
3. What would you record at 31 December 20X7 if employees at Prolong Inc. were not allowed to carry over vacation?