Question

A company gives each of its 50 employees (assume they were all employed continuously through 2015 and 2016) 12 days of vacation a year if they are employed at the end of the year. The vacation accumulates and may be taken starting January 1 of the next year. The employees work 8 hours per day. In 2015, they made $14 per hour and in 2016 they made $16 per hour. During 2016, they took an average of 9 days of vacation each. The company's policy is to record the liability existing at the end of each year at the wage rate for that year. What amount of vacation liability would be reflected on the 2015 and 2016 balance sheets, respectively?

A) $67,200; $93,600
B) $76,800; $96,000
C) $67,200; $96,000
D) $76,800; $93,600

Answer 1

C) $67,200; $96,000

Step-by-step explanation:

The amount of vacation liability that would be reflected on 2015 would consider that the 50 employees had 12 days of vacation and that they worked 8 hours per day and they made $14. So,

50 × 12 × 8 × $14 = $67,200

The amount of vacation liability that would be reflected on the 2016 would consider that the 50 employees had 12 days of vacation but they only took an average of 9 days and three days are accumulated which results in 15 days. Also, they worked 8 hours per day and they made $16. So,

50 × 15 × 8 × $16 = $96,000