Employees of the City of Orleans Earn Ten Days Paid

Multiple Choice

Employees of the City of Orleans earn ten days paid leave for each 12 months of employment.The City has a policy that employed must take their vacation days during the year following the year in which it is earned.If they do not take vacation in the allotted period, they forfeit the vacation pay benefit.Traditionally, employees have taken 80% of the vacation days earned.During the current year, employees of the City of Orleans earned $400,000 in vacation pay.Assuming the city maintains its books and records in a manner to facilitate the preparation of the government-wide financial statements, which of the following entries is the correct entry in the General Fund to record the vacation pay earned during the current period?

A) Debit Expenditures $400,000; Credit Vacation Payable $400,000.
B) Debit Expenses $400,000; Credit Vacation Payable $400,000.
C) Debit Expenses $320,000; Credit Vacation Pay Payable $320,000.
D) No entry required.