Question

M Corp. has an employee benefit plan for compensated absences that gives each employee 15 paid vacation days. Vacation days can be carried over indefinitely. Employees can elect to receive payment in lieu of vacation days. At December 31, 2021, M's unadjusted balance of liability for compensated absences was $35,400. M estimated that there were 200 total vacation days available at December 31, 2021. M's employees earn an average of $177 per day. After recording any necessary adjustment, in its December 31, 2021, balance sheet, what amount of liability for compensated absences is M required to report

Answer 1

$35,400

Step-by-step explanation:

Calculation for what amount of liability for compensated absences is M required to report

Using this formula

Liability for compensated absences=Total vacation days available at December 31, 2021 *Average wage per day

Let plug in the formula

Liability for compensated absences=200*$177 per day

Liability for compensated absences=$35,400

Therefore the Liability for compensated absences at December 31, 2021 will be $35,400