Hebrides Corp. has an employee benefit plan for compensated absences that gives employees 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. Hebrides allows the use of sick days without objective evidence of sickness. At December 31, 2014, Hebrides's unadjusted balance of liability for compensated absences was $10,000. Hebrides estimated that there were 250 vacation days and 100 sick days available at December 31, 2014. Hebrides's employees earn an average of $100 per day but will receive raises such that the average daily pay in 2015 will be $110. In its December 31, 2014, balance sheet, what amount of liability for compensated absences is Hebrides required to report?


a. $25,000
b. $38,500
c. $35,000
d. $27,500