Laid Back Corp.follows the practice of paying all employees for vacation.The vacation pay is not vested,but it carries over for one year if unused.Under GAAP,the obligation for earned but unused vacation should be

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According to GAAP, an obligation for earned but unused vacation should be accrued as a current liability. This means that Laid Back Corp. should recognize the expense in the period it is earned by the employee, even if it is not actually paid out until a later date. Accrued vacation pay is considered a liability because the company is obligated to pay it to employees at a future date. It is important for Laid Back Corp. to accurately reflect this obligation on their financial statements in order to provide stakeholders with a clear understanding of their financial position.