D is corrent. A liability for compensated absences should be accrued if the obligation is attributable to employees’ services already rendered, the obligation relates to rights which vest or accumulate, payment is probable, and the amount is reasonably estimable. All four conditions are met. Per ASC Topic 710, both the vacation pay and holiday pay are considered compensated absences. Therefore, $125,000 ($100,000 + $25,000) should be accrued for compensated absences.
A is incorrect. A liability for compensated absences should be accrued if the obligation is attributable to employees’ services already rendered, the obligation relates to rights which vest or accumulate, payment is probable, and the amount is reasonably estimable. All four conditions are met. Per ASC Topic 710, both the vacation pay and holiday pay are considered compensated absences.
B is incorrect. A liability for compensated absences should be accrued if the obligation is attributable to employees’ services already rendered, the obligation relates to rights which vest or accumulate, payment is probable, and the amount is reasonably estimable. All four conditions are met. Per ASC Topic 710, both the vacation pay and holiday pay are considered compensated absences.
C is incorrect. A liability for compensated absences should be accrued if the obligation is attributable to employees’ services already rendered, the obligation relates to rights which vest or accumulate, payment is probable, and the amount is reasonably estimable. All four conditions are met. Per ASC Topic 710, both the vacation pay and holiday pay are considered compensated absences.
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