Recording and Reporting Compensated Absences

Ulta Inc. allows each employee to earn 15 paid vacation days each year with full pay. Unused vacation time can be carried over to the next year. If not taken during the next year, unused vacation time is lost. By the end of 2020, all but 3 of the 30 employees had taken their earned vacation time. The three employees carried over to 2021 a total of 20 vacation days, which represented 2020 salary of $7,800. During 2021, all of these three used their 2020 vacation carryover; none of them had received a pay rate change from 2020 until the time they used their carryover. Total cash wages paid: 2020, $910,000; 2021, $962,000. There was no carryover of vacation time earned in 2021.

a. Provide the entry for Ulta Inc. to accrue compensated absences on December 31, 2020, and for the payment of vacation days in 2021. Disregard payroll taxes.

	Date	Account Name	Dr.	Cr.
a.	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
	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

b. Compute the total amount of salaries expense for 2020 and 2021. How would the vacation time carried over from 2020 affect the December 31, 2020 balance sheet?

	Salaries expense for 2020	Answer
	Salaries expense for 2021	Answer

	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 Ligitation SettlementLoss on Litigation Settlement	Answer