The Amount of the Liability for Compensated Absences Should Be

Multiple Choice

The amount of the liability for compensated absences should be based on1. the current rates of pay in effect when employees earn the right to compensated absences.2. the future rates of pay expected to be paid when employees use compensated time.3. the present value of the amount expected to be paid in future periods.

A) 1.
B) 2.
C) 3.
D) Either 1 or 2 is acceptable.