Ritter Company has 35 employees who work 8-hour days and are paid hourly. On Jan

Question

Ritter Company has 35 employees who work 8-hour days and are paid hourly. On January 1. 2003. the company began a program of granting its employees 10 days' paid vacation each year. Vacation days earned in 2003 may first be taken on January 1, 2004. Information relative to these employees is as follows: Ritter 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 related to compensated absences that should be reported on Ritter's income statement for 2003? What is the amount of the accrued liability for compensated absences that should be reported at December 31. 2005? ^=$63,280. $60,480. $53,200. $63,840.

Explanation / Answer

3. Amount related to compensated absences that should be reported in inocme statement for 2013:

Total vacation days earned x number of employees x working hours x Rate in current year

10 x 35 x 8 x 17.20 = $48,160

So, the correct option is d. $48,160

Amount related to compensated absences that should be reported in inocme statement for 2015:

Total vacation days earned x number of employees x working hours x Rate in current year

10 x 35 x 8 x 19 = $53,200

So, the correct option is c. $53,200

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