Question

1. A debt is recognized for compensated absences if:
a. The obligation is related to services that employees have already rendered
b. The obligation is related to acquired or accumulated rights
C. It is probable that the obligation will be paid and the amount can be reasonably estimated
d. All of the above

2.. A company places a coupon inside each box of its product. During 2020 the company placed coupons in 1,000 of the boxes it sold. The coupon will be used to purchase a cap numbered 21. The coupons can be used on any date in 202 and 2021. The company purchased (in 2020) 400 caps. As of December 31, 2020, the company had 150 caps remaining. The cost of those 150 caps will be accounted for on December 31, 2020 as:
a. Promotion expense
b. Promotion debt
c. Inventory
d. Prepaid expense

Answer 1

Solution 1. A debt is recognized for compensated absences if the following conditions are satisfied: 1. The obligation is related to services that employees have already rendered 2. The obligation is related to acquired or accumulated rights 3. It is probable that the obligation will be paid and the amount can be reasonably estimated Conclusion Hence the corrcet option is d) All of the above