Of a company's employees,75 percent typically qualify to receive two weeks' paid vacation out of 50 working weeks per year.The entry to record the amount of estimated liability for vacation pay for a week in which the total payroll is $9,600 :

Question

Quizplus · Accepted Answer

To record the estimated liability for vacation pay, we use the formula: 
Total Payroll * Percentage of Employees qualifying for vacation * Weeks of vacation per year / Weeks worked in a year

Total Payroll = $9,600
Percentage of employees qualifying for vacation = 75% (given)
Weeks of vacation per year = 2 weeks (given)
Weeks worked in a year = 50 weeks

Therefore, the entry to record the estimated liability for vacation pay for a week would be:

Debit: Vacation Pay Expense $144 (9600 * 75% * 2/50)
Credit: Vacation Pay Liability $144

The correct journal entry out of the given choices is B.

Of a Company's Employees,75 Percent Typically Qualify to Receive Two Estimated Liability for Vacation Pay 144 Cash 144\begin{array}{llr} \text { Estimated Liability for Vacation Pay } &144 \\ \text { Cash } &&144\\\end{array} Estimated Liability for Vacation Pay Cash ​144​144​

Of a Company's Employees,75 Percent Typically Qualify to Receive Two $\begin{array}{llr} \text { Estimated Liability for Vacation Pay } &144 \\ \text { Cash } &&144\\\end{array}$