The Rexallo Company begins business on January 2, 2010 with 15 employees. Its company policy is to permit each employee to take six days of paid sick leave each year and one and one half days of paid vacation leave for each month worked. The accrued vacation leave cannot be taken until the employee has been with the company nine months. The sick leave, if not used, accumulates to a 24-day maximum. The vacation leave accumulates for two years, but at any time after a one-year period the employee may request additional compensation in lieu of taking paid vacation leave. The company desires to record the liability for compensated absences on a quarterly basis. Assume that the gross wages for each employee are $100 per day.
The following selected events take place during the first two quarters of 2010:
1. On March 31, 2010, the quarterly liability for compensated absences is to be recorded.
2. On April 30, 2010, the following $45,000 monthly payroll, including paid vacation and sick leave, is summarized from the records of Rexallo:

3. On June 30, 2010, the quarterly liability for compensated absences is to be recorded.

Required
1. Prepare journal entries to record the preceding events, ignoring payroll taxes and assuming that both sick leave and vacation time meet the requirements of GAAP for accrual.
2. Prepare a partial interim balance sheet as of March 31, 2010 to disclose the liability created in Requirement1.

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Time Worked $42,000 Payroll for Vacation Taken $1,800 Sick Leave Taken $1,200 Salaries