Recording and Reporting Compensated Absences

Aloha Company has a personnel policy that allows each employee with at least one year$$s employment to receive $20$ days vacation time and two holidays with regular pay. Unused days are carried over to the next year. If not taken during the next year, the vacation and holiday times are lost. Aloha$$s accounting period ends December $31.$ At the end of Year $1,$ the personnel records showed the following:

Vacations Carried Over to Year $2$ Holidays Carried Over to Year $2$

Total Days Total Salaries Total Days Total Salaries

$70$ $$43,68010$ $$6,708$

During Year $2,$ all of the Year $1$ vacation time that was carried over and eight days of the holiday time that was carried over were taken. Salary increases in Year $2$ for these employees relating to the days carried over amounted to $$4,160.$ Total cash wages paid were: Year $1,$ $$4,628,000$; and Year $2,$ $$4,836,000.$ There was no carryover of vacation time earned in Year $2.$

Required

a$.$ Provide the entries in Year $1$ to record $(1)$ salaries, and $(2)$ accrued compensated absences$.$ Disregard payroll taxes.

b$.$ Provide the entry in Year $2$ to record salaries. Disregard payroll taxes.

c$.$ Show how the effects of the transactions should be reported in the Year $1$ and Year $2$ financial statements.