Ivanhoe Company began operations on January 2, 2016. It employs 8 individuals who work 8 hour days and are paid hourly. Each employee earns 10 paid vacation days and 8 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 soon as they are earned; unused sicks dats accumulate. Additionally information is as follows.

Actual Hourly Wage Rate

2016 $8

2017 $9

Vacation Days used by each employee

2016 0

2017 9

Sick days used by each employee

2016 6

2017 7

Ivanhoe Company has chosen to accrue the cost of compensated absences at rates of pay in effect furing the period when earned and to accrue sick pay when earned.

a.Prepare hournal 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 balancr sheet at December 31, 2016 and 2017.