Recording and Reporting Compensated Absences

Aloha Company has a personnel policy that allows each employee with at least one years 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. Alohas accounting period ends December 31. At the end of 2020, the personnel records showed the following:

Vacations Carried Over to 2021
Total Days	Total Salaries
77	$18,480

Holidays Carried Over to 2021
Total Days	Total Salaries
11	$2,838

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 $1,760. Total cash wages paid were: 2020, $1,958,000; and 2021, $2,046,000. 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.

Note: List multiple debits or credits (when applicable) in alphabetical order.

Date	Account Name	Dr.	Cr.
Dec. 31, 2020	AnswerCashAccounts ReceivableInventoryEquipmentCopyrightAccounts PayableAccrued CompensationDeferred Gift Card RevenueEstimated Litigation LiabilityInterest PayableSalaries PayableSales Taxes PayableWarranty LiabilityNote PayableDiscount on Note PayableAsset Retirement ObligationSales RevenueGift Card Breakage RevenueWarranty RevenueCost of Goods SoldInterest ExpenseLegal ExpenseSalaries ExpenseWarranty ExpenseGain on Litigation SettlementLoss on Litigation SettlementN/A	Answer	Answer
	AnswerCashAccounts ReceivableInventoryEquipmentCopyrightAccounts PayableAccrued CompensationDeferred Gift Card RevenueEstimated Litigation LiabilityInterest PayableSalaries PayableSales Taxes PayableWarranty LiabilityNote PayableDiscount on Note PayableAsset Retirement ObligationSales RevenueGift Card Breakage RevenueWarranty RevenueCost of Goods SoldInterest ExpenseLegal ExpenseSalaries ExpenseWarranty ExpenseGain on Litigation SettlementLoss on Litigation SettlementN/A	Answer	Answer
	To accrue for compensated absences
2020	AnswerCashAccounts ReceivableInventoryEquipmentCopyrightAccounts PayableAccrued CompensationDeferred Gift Card RevenueEstimated Litigation LiabilityInterest PayableSalaries PayableSales Taxes PayableWarranty LiabilityNote PayableDiscount on Note PayableAsset Retirement ObligationSales RevenueGift Card Breakage RevenueWarranty RevenueCost of Goods SoldInterest ExpenseLegal ExpenseSalaries ExpenseWarranty ExpenseGain on Litigation SettlementLoss on Litigation SettlementN/A	Answer	Answer
	AnswerCashAccounts ReceivableInventoryEquipmentCopyrightAccounts PayableAccrued CompensationDeferred Gift Card RevenueEstimated Litigation LiabilityInterest PayableSalaries PayableSales Taxes PayableWarranty LiabilityNote PayableDiscount on Note PayableAsset Retirement ObligationSales RevenueGift Card Breakage RevenueWarranty RevenueCost of Goods SoldInterest ExpenseLegal ExpenseSalaries ExpenseWarranty ExpenseGain on Litigation SettlementLoss on Litigation SettlementN/A	Answer	Answer
	To record wages paid in 2020
2021	AnswerCashAccounts ReceivableInventoryEquipmentCopyrightAccounts PayableAccrued CompensationDeferred Gift Card RevenueEstimated Litigation LiabilityInterest PayableSalaries PayableSales Taxes PayableWarranty LiabilityNote PayableDiscount on Note PayableAsset Retirement ObligationSales RevenueGift Card Breakage RevenueWarranty RevenueCost of Goods SoldInterest ExpenseLegal ExpenseSalaries ExpenseWarranty ExpenseGain on Litigation SettlementLoss on Litigation SettlementN/A	Answer	Answer
	AnswerCashAccounts ReceivableInventoryEquipmentCopyrightAccounts PayableAccrued CompensationDeferred Gift Card RevenueEstimated Litigation LiabilityInterest PayableSalaries PayableSales Taxes PayableWarranty LiabilityNote PayableDiscount on Note PayableAsset Retirement ObligationSales RevenueGift Card Breakage RevenueWarranty RevenueCost of Goods SoldInterest ExpenseLegal ExpenseSalaries ExpenseWarranty ExpenseGain on Litigation SettlementLoss on Litigation SettlementN/A	Answer	Answer
	AnswerCashAccounts ReceivableInventoryEquipmentCopyrightAccounts PayableAccrued CompensationDeferred Gift Card RevenueEstimated Litigation LiabilityInterest PayableSalaries PayableSales Taxes PayableWarranty LiabilityNote PayableDiscount on Note PayableAsset Retirement ObligationSales RevenueGift Card Breakage RevenueWarranty RevenueCost of Goods SoldInterest ExpenseLegal ExpenseSalaries ExpenseWarranty ExpenseGain on Litigation SettlementLoss on Litigation SettlementN/A	Answer	Answer
	To record wages paid in 2021

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

Balance Sheet, Dec. 31	2020
Current liabilities
AnswerCashAccounts ReceivableInventoryEquipmentCopyrightAccounts PayableAccrued CompensationDeferred RevenueEstimated Litigation LiabilityInterest PayableSalaries PayableSales Taxes PayableWarranty LiabilityNote PayableDiscount on Note PayableAsset Retirement ObligationSales RevenueGift Card Breakage RevenueWarranty RevenueCost of Goods SoldInterest ExpenseLegal ExpenseSalaries ExpenseWarranty ExpenseGain on Litigation SettlementLoss on Litigation Settlement	Answer

Income Statement	2020	2021
Expenses
AnswerCashAccounts ReceivableInventoryEquipmentCopyrightAccounts PayableAccrued CompensationDeferred RevenueEstimated Litigation LiabilityInterest PayableSalaries PayableSales Taxes PayableWarranty LiabilityNote PayableDiscount on Note PayableAsset Retirement ObligationSales RevenueGift Card Breakage RevenueWarranty RevenueCost of Goods SoldInterest ExpenseLegal ExpenseSalaries ExpenseWarranty ExpenseGain on Litigation SettlementLoss on Litigation Settlement	Answer	Answer