Question

  • Creator
    Topic
  • #192551
    Oimie
    Member

    Ross & Co. pays all salaried employees on Monday for the 5-day work week ended the previous Friday. The last payroll recorded for the year ended December 31, year 2 was for the week ended December 25, year 2. The payroll for the week ended January 1, year 3 included regular weekly salaries of $80000 and vacation pay of $ 25000 for the vacation time earned in year 2 but not taken by December 31, year 2. Ross had an accrued liability of $20000 for vacation pay as on December 31, year 1. In its December 31, year 2 balance sheet, what amount should Ross report as accrued salary and vacation pay?

    • $64000

    • $69000

    • $84000

    • $89000

    Answer says it’s $89,000 ($64,000 + $25,000). Why is the $20,000 accrued vacation pay disregarded?

    FAR 85 June 2015
    AUD 80 Nov 2015
    REG 83 Nov 2015
    BEC 79 Feb 2016

Viewing 6 replies - 1 through 6 (of 6 total)
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  • #653824
    mla1169
    Participant

    Because that 25k that was paid out during the week ending 1/1 included all of the vacation time earned but not taken.

    FAR- 77
    AUD -49, 71, 84
    REG -56,75!
    BEC -75

    Massachusetts CPA (non reporting) since 3/12.

    #653825
    Oimie
    Member

    @mla1169: Thanks for the reply! But in the problem it specifically said “vacation pay of $25000 for the vacation time earned in year 2”.

    FAR 85 June 2015
    AUD 80 Nov 2015
    REG 83 Nov 2015
    BEC 79 Feb 2016

    #653826
    mla1169
    Participant

    That is correct. At the end of year 2 they had accrued 20k for earned vacations and on Jan 4 of year 3 they paid all of that plus another $5k out. Since the jan 4 payment included all vacation time earned but not taken, that 20k is part of the 25k, not in addition to it.

    FAR- 77
    AUD -49, 71, 84
    REG -56,75!
    BEC -75

    Massachusetts CPA (non reporting) since 3/12.

    #653827
    Oimie
    Member

    @mla1169: The accrued $20,000 was from year 1 not year 2.

    So basically:

    Dec 31 year 1: Accrued vacation pay: $20,000 <Meaning this was earned in year 1

    Dec 31 year 2: Salaries payable: $64,000 + $25000 for the vacation time “earned in year 2” <<

    The way they worded it, doesn't it mean $20,000 is independent from the $25,000?

    FAR 85 June 2015
    AUD 80 Nov 2015
    REG 83 Nov 2015
    BEC 79 Feb 2016

    #653828
    mla1169
    Participant

    The 20k bal at 12/31/01 would have gone away with the first payroll of year 2, the same way the $25k liability at 12/31/x2 goes away with paychecks dated 1/4/x3.

    FAR- 77
    AUD -49, 71, 84
    REG -56,75!
    BEC -75

    Massachusetts CPA (non reporting) since 3/12.

    #653829
    Oimie
    Member

    @mla1169: Yeh I guess we have to assume that. Thanks bruhda!

    FAR 85 June 2015
    AUD 80 Nov 2015
    REG 83 Nov 2015
    BEC 79 Feb 2016

Viewing 6 replies - 1 through 6 (of 6 total)
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