Abbott Co. has 5 employees who worked the entire year. Each employee earns 6 paid vacation days annually. Vacation days may be taken during December of 2009 and all of 2010. All unused vacation days are paid when the employee leaves the company. The daily wage in 2009 per employee is $100. This is an example of
A) a definite liability.
B) a third party liability.
C) a gain contingency.
D) unearned revenue.

Question

Quizplus · Accepted Answer

This is an example of a definite liability because the company has an obligation to pay for the unused vacation days, which is a known amount based on the employees' daily wages.

Abbott Co Has 5 Employees Who Worked the Entire Year