At the end of April, ABC company had a balance of $37,910 in vacations benefits payable account. During May, employers earned an additional $2,790 in vacation benefits, but some employee used vacation days amounting to $2,050 of vacation benefits.. The $2,050 was charged to Wage Expense when it was paid in May. What adjusting entry would ABC company make at the end of May to bring the vacation benefits payable account up to date.

Question

At the end of April, ABC company had a balance of $37,910 in vacations benefits payable account. During May, employers earned an additional $2,790 in vacation benefits, but some employee used vacation days amounting to $2,050 of vacation benefits.. The $2,050 was charged to Wage Expense when it was paid in May. What adjusting entry would ABC company make at the end of May to bring the vacation benefits payable account up to date.

Here is the answer I have but not sure if it is correct.
Vacation Benefits Expense 38,650
Vacation Benefits Payable 38,650
Thanks in advance.

Answer 1

The adjusting entry at the end of May to bring the vacation benefits payable account up to date would be:

Debit:
Vacation Benefits Expense - $2,790 (to record the additional vacation benefits earned during May)

Credit:
Vacation Benefits Payable - $2,790 (to reduce the vacation benefits payable balance)

So, the correct adjusting entry should be:

Debit:
Vacation Benefits Expense - $2,790

Credit:
Vacation Benefits Payable - $2,790

Answer 2

To calculate the adjusting entry for the vacation benefits payable account at the end of May, we need to consider the changes in the account during the month of May.

1. Calculate the beginning balance of the vacation benefits payable account at the end of April:
Beginning balance = $37,910

2. Calculate the additional vacation benefits earned by employees during May:
Additional benefits earned = $2,790

3. Calculate the vacation benefits used by employees during May:
Benefits used = $2,050

4. Calculate the ending balance of the vacation benefits payable account at the end of May:
Ending balance = Beginning balance + Additional benefits earned - Benefits used
= $37,910 + $2,790 - $2,050
= $38,650

Based on the calculations above, the adjusting entry for ABC company at the end of May to bring the vacation benefits payable account up to date would be:

Debit:
Vacation Benefits Expense - $38,650

Credit:
Vacation Benefits Payable - $38,650

The debit in the adjusting entry represents the total expenses incurred for vacation benefits earned by employees during May. The credit represents the increase in the vacation benefits payable liability account, reflecting the updated balance at the end of May.