In 2015, employees of Pecos River County earned $5 million in vacation pay. They were paid for $4.2 million but deferred taking the balance of their earned vacations until subsequent years. Also, employees were paid $0.7million for vacation earned in previous years.
1. Prepare the journal entry in the general fund to reflect the vacation pay earned in 2015.
2. Prepare the journal entry to reflect the payments for vacation days that had been earned in prior years.
3. Comment on how the schedule of long-term obligations would be affected by these transactions.
4. Comment on how the government-wide statements would be affected by these transactions. Specifically, what would be the reported vacation expenses for 2015, and what would be the year-end accrued liability for vacation pay assuming that the beginning of year liability was $0.7 million?