B Corp. has an employee benefit plan for compensated absences that gives each em
ID: 2491824 • Letter: B
Question
B Corp. has an employee benefit plan for compensated absences that gives each employee 10 paid vacation days and 10 paid sick days. Both vacation and sick days can be carried over indefinitely. Employees can elect to receive payment in lieu of vacation days; however, no payment is given for sick days not taken. At December 31, 2016, B's unadjusted balance of liability for compensated absences was $56,000. B estimated that there were 320 total vacation days and 160 sick days available at December 31, 2016. B's employees earn an average of $214 per day. In its December 31, 2016, balance sheet, what amount of liability for compensated absences is B required to report?
Explanation / Answer
Solution.
B can only report amount of liability for vacation days ion the balance sheet . because it probable that paid vacation will be taken.
Therefore the libility is 320 x $214 = $68,480.
Sick days is not payable so it will be not included in amount of liability for compensated .
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