A company gives each of its 50 employees (assume they were all employed continuously through 2007 and 2008) 12 days of vacation a year if they are employed at the end of the year.The vacation accumulates and may be taken starting January 1 of the next year.The employees work 8 hours per day.In 2007, they made $17.50 per hour and in 2008 they made $20 per hour.During 2008, they took an average of 9 days of vacation each.The company's policy is to record the liability existing at the end of each year at the wage rate for that year.What amount of vacation liability would be reflected on the 2007 and 2008 balance sheets, respectively?
A)$84,000; $117,000
B)$96,000; $120,000
C)$84,000; $120,000
D)$96,000; $117,000

Question

Quizplus · Accepted Answer

First, we need to calculate the amount of vacation time accumulated by each employee in 2007:

50 employees x 12 days per employee = 600 total vacation days

Next, we need to calculate the liability for these vacation days at the 2007 wage rate of $17.50 per hour:

600 days x 8 hours per day x $17.50 per hour = $84,000

So the 2007 balance sheet liability for vacation time is $84,000.

Moving on to 2008, we need to calculate the vacation liability for the days not taken by employees:

50 employees x (12 days - 9 days taken) = 150 total vacation days

We now need to calculate the liability for these remaining vacation days at the 2008 wage rate of $20 per hour:

150 days x 8 hours per day x $20 per hour = $24,000

So the 2008 balance sheet liability for vacation time is $24,000.

To calculate the total vacation liability for 2007 and 2008 combined, we simply add the two amounts:

$84,000 + $24,000 = $108,000

Therefore, the correct answer is C) $84,000; $120,000.

A Company Gives Each of Its 50 Employees (Assume They