Question

Sheridan Company has 80 employees who work 8-hour days and are paid hourly. On January 1, 2017, the company began a program of granting its employees 10 days of paid vacation each year. Vacation days earned in 2017 may first be taken on January 1, 2018. Information relative to these employees is as follows: Hourly Vacation Days Earned Vacation Days Used Year Wages by Each Eployeeby Each Employee 2017 $16.50 2018 18.50 2019 21.50 10 1.n 10 8 10 Sheridan has chosen to accrue the liability for compensated absences at the current rates of pay in effect when the compensated time is earned What is the amount of expense relative to compensated absences that should be reported on Sheridan's income statement for 2017? O $105600. $118400. O $0. O $137600.

Answer 1

Total number of employees -80 employees ->given in question = 10 days umber of Vacation days earned by each employee given in question Total number of vacation days carned by all employees in the ycar 2017 80 employees x 10 days per employee = 800 days Number of vacation days used by each employee in 2017 -0 given in question Total number of vacation days not utilized or not used during 2017Total vacation days earned - Used vacation days = 800 days-0 days - 800 days Therefore, company has to create a provision for 800 days relative to compensated absences Amount of expense that should be reported on income statement for 2017-Unused vacation days x Wage per day Unused vacation days x (8 hours x hourly wage) 800 days x (8 days x $16.50) $105,600 Amount of expense that should be reported on income statement for 2017- S105,600