E12.7 (LO 1) (Compensated Absences) Use the same information as in E12.6, except that Matthewson SA has chosen (1) not to accrue paid sick leave until used and (2) to accrue vacation time at expected future rates of pay without discounting. The company used the following projected rates to accrue vacation time.

Year in Which Vacation Time Was Earned Projected Future Pay Rates Used to Accrue Vacation Pay 2024 €12.90 2025 13.70 Instructions

a. Prepare journal entries to record transactions related to compensated absences during 2024 and 2025.

b. Compute the amounts of any liability for compensated absences that should be reported on the statement of financial position at December 31, 2024, and 2025.