Lemon County permits employees to accumulate any sick leave that they do not take. If employees do not use accumulated sick leave, then they will be paid for those days upon retirement or termination (up to a maximum of 45 days). In 2015 employees earned $4.0 million in sick leave. Of this amount they were paid $3.1 million. The county expects that they will be paid $0.6 million as they take sick days in future years and $0.2 million upon retirement or termination. The balance of $0.1 million will not have to be paid.
1. Based on current standards, prepare journal entries in the general fund to reflect the sick leave earned and paid for in 2015. Indicate the amount to be reported in the schedule of long-term obligations and the government-wide statements.
2. What is the rationale for the standards that underlie your entries?