(Compensated Absences) Assume the facts in the preceding exercise, except that Zero Mostel Company has chosen not to accrue paid sick leave until used, and has chosen to accrue vacation time at expected future rates of pay without discounting. The company used the following projected rates to accrue vacation time.

Instructions

(a) Prepare journal entries to record transactions related to compensated absences during 2003 and 2004.

(b) Compute the amounts of any liability for compensated absences that should be reported on the balance sheet at December 31, 2003, and 2004.

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Year in Which Vacation Time Was Earned 2003 2004 Projected Future Pay Rates Used to Accrue Vacation Pay $10.75 11.60