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Vargas Company has 35 employees who work 8-hour days and are paid hourly.On January 1, 2010, the company began a program of granting its employees 10 days of paid vacation each year.Vacation days earned in 2010 may first be taken on January 1, 2011.Information relative to these employees is as follows:
Vargas has chosen to accrue the liability for compensated absences at the current rates of pay in effect when the compensated time is earned.
-What is the amount of the accrued liability for compensated absences that should be reported at December 31, 2012?

Question

Use the following information for questions.
Vargas Company has 35 employees who work 8-hour days and are paid hourly.On January 1, 2010, the company began a program of granting its employees 10 days of paid vacation each year.Vacation days earned in 2010 may first be taken on January 1, 2011.Information relative to these employees is as follows:  
Vargas has chosen to accrue the liability for compensated absences at the current rates of pay in effect when the compensated time is earned.
-What is the amount of the accrued liability for compensated absences that should be reported at December 31, 2012?

Quizplus · Accepted Answer

The accrued liability for compensated absences is calculated based on the number of vacation days earned but not taken by employees, multiplied by their daily wage. The correct amount is $94,920.

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