Answered: Gonzalez Co. accrues the liability for…

SWFT Individual Income Taxes

43rd Edition

ISBN:9780357391365

Author:YOUNG

Publisher:YOUNG

Chapter18: Accounting Periods And Methods

Section: Chapter Questions

Problem 30CE

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Gonzalez Co. accrues the liability for vacation pay at the rate of pay in effect when the compensated time is earned. Gonzalez has 90 employees who all work 8-hour days. The employees earn 12 paid vacation days per year. They may take those vacation days any time after the year in which the days are earned. Information about the rates of pay, vacation days earned, and vacation days used for 2020, 2021, and 2022 is as follows:

Year	Hourly wages	Vacation days earned by each employee	Vacation days used by each employee
2020	$30.00	12	0
2021	$31.00	12	9
2022	$32.00	12	12

What amount should Gonzalez present on its December 31, 2022 balance sheet as its liability for vacation pay?

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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