Question
Vaughn Manufacturing has 70 employees who work 8-hour days and are paid hourly. On January 1, 2020, the company began a program of granting its
Vaughn Manufacturing has 70 employees who work 8-hour days and are paid hourly. On January 1, 2020, the company began a program of granting its employees 10 days of paid vacation each year. Vacation days earned in 2020 may first be taken on January 1, 2021. Information related to these employees is as follows:
Year | Hourly Wages | Vacation Days Earned by Each Employee | Vacation Days Used by Each Employee | ||||
2020 | $22.50 | 10 | 0 | ||||
2021 | 24.50 | 10 | 8 | ||||
2022 | 27.50 | 10 | 10 |
Vaughn 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 related to compensated absences that should be reported on Vaughns income statement for 2020?
a. $126000.
b. $137200.
c. $0.
d. $154000.
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