What amount of liability should the city recognize on fund-based financial statements at December 31, Year 1? Assume that all remaining vacations will be taken in July.

a. It depends on whether the employees work at governmental activities or business-type activities.

b. $–0–.

c. $40,000.

d. $52,000.

The employees of the City of Jones earn vacation time that totals \($1,000\) per week during the year. Of this amount, \($12,000\) is actually taken in Year 1 and the remainder is taken in Year 2.