Bettinghaus Corporation began business on January 2, 2019, with five employees. Its sick leave and vacation policy follows: Each employee is allowed 6 days of paid sick leave each year and one day of paid vacation leave for each month worked. The accrued vacation leave cannot be taken until the employee has been with the company 1 year. The sick leave, if not used, accumulates to an 18-day maximum. The vacation leave accumulates for 5 years, but at any time the employee may request additional compensation in lieu of taking paid vacation leave. The company records its liability for both compensated absences on a quarterly basis. The daily gross wages for each employee are $120.

Required:

1.	Prepare journal entries to record the liability for compensated absences for the first quarter of 2019. Assume no sick leave had been taken by the employees.
2.	Prepare a partial interim balance sheet showing how the liability created in Requirement 1 would be reported on March 31, 2019.
3.	Next Level Discuss the underlying conceptual basis of accounting for compensated absences.

X

Chart of Accounts

CHART OF ACCOUNTS

Bettinghaus Corporation

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
181	Equipment
189	Accumulated Depreciation

	LIABILITIES
211	Accounts Payable
231	Salaries Payable
232	Liability for Compensated Absences
250	Unearned Revenue
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
910	Income Tax Expense

1. Prepare two journal entries on March 31, 2019 to record: a) sick time earned and b) vacation earned. Assume no sick leave had been taken by the employees.

General Journal Instructions

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4

2. Prepare a partial interim balance sheet showing how the liability created in Requirement 1 would be reported on March 31, 2019.

Balance Sheet Instruction

BETTINGHAUS CORPORATION

Partial Balance Sheet

March 31, 2019

1	Current Liabilities
2