A. On January 1, 2021, Packman Corporation agreed to grant its employees two weeks of vacation each year, with the stipulation that vacations earned each year can be taken the following year. For the year ended December 31, 2021, Packman employees each earned an average of $900 per week. Seven hundred vacation weeks earned in 2021 were not taken during 2021.

REQUIRED:

Prepare the appropriate adjusting entry for vacations earned but not taken in 2021.

Suppose that, by the time vacation actually are taken in 2022, salary rates for employees have risen by an average of 5% from their 2021 level. Also, assume salaries earned in 2022 (including vacations earned and taken in 2022) were $31 million. Prepare a journal entry that summarizes 2022 salaries and the payment for 2021 vacations taken in 2022.

B. Celopatra Corporation introduced a new line of home shades in 2021 that carry a two-year warranty against manufacturers defects. Based on their experience with previous product introduction, warranty costs are expected to approximate 3% of sales. Sales and actual warranty expenditures for the first year of selling the product were: Sales $5,000,000; Actual warranty $37,500.

Additionally, at the time of purchase, customers are offered the opportunity to also buy a two-year extended warranty for an additional charge. During 2021, Celopatra received $412,000 for these extended warranties (approximately evenly throughout the year).

REQUIRED:

Does the above situation represents a loss contingency? Why or why not? How should Celopatra account for it?

Prepare journal entries that summarizes sales of the home shades (assume all credit sales) and any aspects of the warranty that should be recorded during 2021?

What amount should Celopatra report as a liability at December 31, 2021?

Prepare journal entries that summarizes sale of extended warranties and any aspects of the warranty that should be recorded on year 2024.