Question

And employee worked the entire year of 2022 and earned two weeks of vacation as specified in the companies late labor agreement the agreement also states that the two weeks of vacation shall be taken any time in 2023 and the amount paid will be 80 hours multiplied by the employees rate of pay at December 31, 2022 at December 31, 2022. The employees pay rate was $15 which financial statements are affected in the year 2022.

Answer 1

In the year 2022, the financial statements that would be affected are the income statement and the balance sheet.

On the income statement, there would be an expense recorded for the employee's wages for the entire year of 2022. This expense would be based on the employee's pay rate of $15 per hour and the number of hours worked.

On the balance sheet, there would be a liability recorded for the vacation pay owed to the employee. This liability represents the amount that will be paid to the employee for the two weeks of vacation in 2023. The liability would be calculated as 80 hours multiplied by the employee's pay rate of $15 at December 31, 2022.