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, 2013, B's unadjusted balance of liability for compensated absences was $42,000. B estimated that there were 300 total vacation days and 150 sick days available at December 31, 2013. B's employees earn an average of $200 per day. In its December 31, 2013, balance sheet, what amount of liability for compensated absences is B required to report?
A)$60,000.
B)$84,000.
C)$90,000.
D)$144,000.

Question

Quizplus · Accepted Answer

The liability for compensated absences should include only the vacation days since employees can receive payment for them. With 300 vacation days at $200 per day, the liability is $60,000.

B Corp Has an Employee Benefit Plan for Compensated Absences That