XYZ Co. began operations on January 2, 2016. It employs 8 individuals who work 8-hour days and are paid hourly. Each employee earns 11 paid vacation days and 7 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 as soon as they are earned; unused sick days accumulate. Additional information is as follows.

Actual Hourly Wage Rate						Vacation Days Used by Each Employee				Sick Days Used by Each Employee
2016			2017			2016		2017		2016		2017
$10			$11			0		10		5		6

XYZ Co. has chosen to accrue the cost of compensated absences at rates of pay in effect during the period when earned and to accrue sick pay when earned.

1) Prepare journal entries to record transactions related to compensated absences during 2016 (three journal entries) and 2017 (four journal entries).

2) Compute the amounts of any liability for compensated absences that should be reported on the balance sheet at December 31, 2016 and 2017.