State University, a Public University, Has a Policy of Granting

question 29

Multiple Choice

State University, a public university, has a policy of granting faculty members a one-year paid sabbatical leave after a period of seven years continuous employment. The leave is for further study, research, or public service. A particular faculty member earns $90,000 per year. Assuming that the college maintains its books and records in a manner that facilitates the preparation of fund financial statements and assuming that any appropriate accruals have been made, what is the appropriate entry to record the employee's salary paid while on sabbatical leave?

• A) Debit Expenditures $90,000; Credit Cash $90,000.
• B) Debit Expenses $90,000; Credit Cash $90,000.
• C) Debit Sabbatical leave payable $90,000; Credit Cash $90,000.
• D) No entry required.

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Definitions:

Investment

Allocating resources, usually money, with the expectation of generating an income or profit.

Reward-to-Variability Ratio

A ratio used to evaluate the return of an investment relative to its risk, with a higher ratio indicating a more favorable risk-reward profile.

Risk-free Rate

A presumed income from an investment that is free from any financial risk, typically reflected through government bond yields.

Efficient Frontier

A set of optimal portfolios that offer the highest expected return for a defined level of risk or the lowest risk for a given level of expected return, used in modern portfolio theory.