B Corp Has an Employee Benefit Plan for Compensated Absences That

question 105

Multiple Choice

B Corp. has an employee benefit plan for compensated absences that gives each employee 10 paid vacation days and 10 paid sick days. Both vacation and sick days can be carried over indefinitely. Employees can elect to receive payment in lieu of vacation days; however, no payment is given for sick days not taken. At December 31, 2018, B's unadjusted balance of liability for compensated absences was $42,000. B estimated that there were 300 total vacation days and 150 sick days available at December 31, 2018. B's employees earn an average of $200 per day. In its December 31, 2018, balance sheet, what amount of liability for compensated absences is B required to report?

• A) $60,000.
• B) $84,000.
• C) $90,000.
• D) $144,000.

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Definitions:

Free-Rider Effect

Gaining the benefits of group membership by avoiding costly obligations of membership and by allowing other members to incur those costs.

Self-Interest

The consideration of personal benefit or advantage, which often motivates behavior and decision-making.

Commons Dilemma

A situation in which individual interests conflict with collective well-being, often resulting in the overuse or depletion of shared resources.

Renewable Resource

A natural resource that can replenish itself over time through natural processes, such as solar energy, wind, and water cycles.