Tryst Inc. has a policy of accruing $1,500 for every employee as a vacation benefit. Sarah, an employee, took a vacation. Which of the following is the correct journal entry for the vacation benefit paid?
A) $$\begin{array} { | c | r | r | }
\hline \text { Vacation Benefit Payable } & 1,250 & \
\hline \text { Vacation Benefit Expense } & & 1,250 \
\hline
\end{array}$$
B) $$\begin{array} { | c | r | r | }
\hline \text { Vacation Benefit Expense } & 1,500 & \
\hline \text { Cash } & & 1,500 \
\hline
\end{array}$$
C) $$\begin{array} { | c | r | r | }
\hline \text { Vacation Benefit Payable } & 1,500 & \
\hline \text { Cash } & & 1,500 \
\hline
\end{array}$$
D) $$\begin{array} { | c | r | r | }
\hline \text { Vacation Benefit Expense } & 1,250 & \
\hline \text { Vacation Benefit Payable } & & 1,250 \
\hline
\end{array}$$

Question

Tryst Inc. has a policy of accruing $1,500 for every employee as a vacation benefit. Sarah, an employee, took a vacation. Which of the following is the correct journal entry for the vacation benefit paid?
A) $$\begin{array} { | c | r | r | } 
\hline \text { Vacation Benefit Payable } & 1,250 & \
\hline \text { Vacation Benefit Expense } & & 1,250 \
\hline
\end{array}$$
B) $$\begin{array} { | c | r | r | } 
\hline \text { Vacation Benefit Expense } & 1,500 & \
\hline \text { Cash } & & 1,500 \
\hline
\end{array}$$
C) $$\begin{array} { | c | r | r | } 
\hline \text { Vacation Benefit Payable } & 1,500 & \
\hline \text { Cash } & & 1,500 \
\hline
\end{array}$$
D) $$\begin{array} { | c | r | r | } 
\hline \text { Vacation Benefit Expense } & 1,250 & \
\hline \text { Vacation Benefit Payable } & & 1,250 \
\hline
\end{array}$$

Quizplus · Accepted Answer

Since the company policy is to accrue $1,500 for every employee as a vacation benefit, Tryst Inc. would have already recorded this amount as a liability in the Vacation Benefit Payable account. When Sarah takes her vacation, the company would then pay her the accrued benefit, which would be recorded as a decrease in the liability account and an increase in the Cash account. Therefore, the correct journal entry is to debit Vacation Benefit Payable for $1,500 and credit Cash for $1,500. Option A is incorrect because it only records a portion of the expense as it only debits $1,250, while Option B and D are incorrect because they don't account for the payable liability that was already recorded.

Tryst Inc Has a Policy of Accruing $1,500 for Every Employee