# Question: 1 A newly incorporated town incurred and paid compensated absences

1. A newly incorporated town incurred and paid compensated absences for vacation pay and sick leave of \$40,000 during its first year of operation, 20X1.
2. At the end of 20X1, the town estimated that its total liability for compensated absences, none of which is payable from available expendable financial resources, was \$75,000.
3. In 20X2, the town paid \$130,000 for compensated absences for vacation pay and sick leave.
4. At the end of 20X2, the town estimated that its total liability for compensated absences was \$160,000. Of the \$160,000 liability for compensated absences, \$5,000 was deemed to be payable from available expendable financial resources.
5. In 20X3, the town paid \$210,000 for compensated absences for vacation pay and sick leave.
6. At the end of 20X3, the town estimated that its total liability for compensated absences was \$140,000. None of the \$140,000 liability for compensated absences was deemed to be payable from available expendable financial resources.

Required
a. Prepare the journal entries required in the General Ledger of the town’s General Fund to record the information in the preceding items.
b. What amount of liabilities should be reported in the General Fund balance sheet for compensated absences for each of these years?
c. What amount of expenditures must the town report each year in the General Fund for compensated absences?
d. Calculate the amount of expenditures that would have been reported each year by the town if the payments and liabilities involved had been for claims and judgments instead of for compensated absences.
e. Assume that the above payments and liabilities are associated with payments to and liabilities payable to the town’s defined benefit pension plan. Calculate the amount of General Fund pension expenditures for each year.

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