Question - Simson Company has 35 employees who work 8-hour days and are paid hourly. On January 1, 2006, the company began a program of granting its employees 10 days of paid vacation each year. Vacation days earned in 2006 may first be taken on January 1, 2007. Information relative to these employees is as follows:
|
Year
|
Hourly Wages
|
Vacation Days Earned by Each Employee
|
Vacation Days Used by Each Employee
|
|
2006
|
$25.80
|
10
|
0
|
|
2007
|
27.00
|
10
|
8
|
|
2008
|
28.50
|
10
|
10
|
Simson 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 expense relative to compensated absences that should be reported on Simson's income statement for 2006?
a. $0.
b. $68,880.
c. $75,600.
d. $72,240.
What is the amount of the accrued liability for compensated absences that should be reported at December 31, 2008?
a. $94,920.
b. $90,720.
c. $79,800.
d. $95,760.