Northwest Company Determined That It Has an Obligation Relating to Employees

question 58

Multiple Choice

Northwest Company determined that it has an obligation relating to employees' rights to receive compensation for future absences attributable to employees services already rendered. The obligation relates to rights that vest, and payment of the compensation is probable. The amounts of Northwest's obligations as of December 31 are reasonably estimated as follows:

In its December 31 balance sheet, what amount should Northwest report as its liability for compensated absences?

• A) $0
• B) $80,000
• C) $110,000
• D) $190,000

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Definitions:

Principal Objective

The main goal, aim, or purpose that an individual, organization, or project intends to achieve.

Interpreting Contracts

The process of determining the legal obligations and rights arising from the terms of a contract.

Proper Consideration

Adequate value or compensation exchanged between parties in a contract, which is necessary for the agreement to be legally binding.

Debt

Money owed by one party, the borrower, to another, the lender; typically involving repayment terms and sometimes interest.