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2. (5 points) Pearl Company began operations on January 2, 2019. It employs 12 individuals who work 8-hour days and are paid hourly. Each employee earns 14 paid vacation days and 8 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 2019 2020 $14.45 $15.85 Vacation Days Used by Each Employee 2019 2020 0 13 Sick Days Used by Each Employee 2019 2020 4 6 Pearl Company has chosen not to accrue paid sick leave until used, and has chosen to accrue vacation time at expected future rates of pay without discounting. The company used the following projected rates to accrue vacation time. Year in which Vacation Time Was Earned 2019 2020 Projected Future Pay Rates Used to Accrue Vacation Pay $14.25 15.60 a. Prepare journal entries to record transactions related to compensated absences during 2019 and 2020. 2019: 1. To accrue expense and liability for vacations 2. To record sick leave paid Accounts DR CR Date 1. 2. 2020: 1. To accrue expense and liability for vacations 2. To record sick leave paid 3. To record vacation time paid Accounts DR Date 1. CR 2. 3 Accounts DR CR Date 1. 2. 2020: 1. To accrue expense and liability for vacations 2. To record sick leave paid 3. To record vacation time paid Accounts DR CR Date 1. 2. 3. b. Compute the amounts of any liability for compensated absences that should be reported on the balance sheet at December 31, 2019 and 2020. 2019 2020 Accrued liability

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