A city has adopted the following plan for compensated time off: City employees are entitled to
Question:
A city has adopted the following plan for compensated time off: • City employees are entitled to a specified number of days each year for holidays and vacation. The number depends on length of service (20 days for employees with fewer than five years of service, 25 days for employees with between five and ten years, 30 days for employees with more than ten years). Employees may accumulate up to 40 days, which they can either carry over to future years or be compensated for upon termination.
• Employees are also entitled to seven sick days per year. They may carry over to future years up to 60 sick days.
However, upon termination they can be paid for no more than 20 unused days
. During 2015 the city paid employees $4.2 million for holidays and vacations during the year. Of this amount, $0.4 million was for days carried over from previous years. In addition, employees earned $0.5 million in time off that they expect to use, and be paid for, in the future.
The city also paid $1.5 million in sick leave, none of which was paid to employees upon termination. Of this amount, $0.3 million was carried forward from previous years. The city estimates that employees earned an additional $0.8 million in unused sick leave. Of this, $0.5 million will eventually be paid for as time off, $0.2 million will be paid upon termination, and $0.1 million will lapse.
1. Prepare a general fund journal entry to record the holiday and vacation compensation. Indicate the amount of any other liability that would be recorded on both the government-wide statements and the schedule of long-term obligations.
2. Do the same for the sick leave.
Government and Not for Profit Accounting Concepts and Practices
ISBN: 978-1118983270
7th edition
Authors: Michael Granof, Saleha Khumawala, Thad Calabrese, Daniel Smith