Employees of the General Fund of Scott City Earn Ten

Multiple Choice

Employees of the general fund of Scott City earn ten days of vacation for each 12 months of employment.The city permits employees to carry the vacation days forward as long as they wish.During the current year employees earned $800,000 of vacation benefits, of which the city estimates $500,000 will be taken in the next year and the balance will be carried forward.Assuming that the city maintains its books and records in a manner that facilitates the preparation of government-wide financial statements, which of the following entries should be made to record the vacation pay earned during the current period?

A) Debit Expenditures $800,000; credit Vacation pay payable $800,000.
B) Debit Expenditures $500,000; credit Vacation pay payable $500,000.
C) Debit Vacation expense $800,000; credit Vacation pay payable $800,000.
D) No entry required.
Use the following information to answer Questions 10 through 13.
Lincoln City has a 6/30 fiscal year-end.The city has a policy of recognizing fund revenues/ expenditures when collected/paid or if expected to be collected/paid within 60 days of year-end.
The city has a sick leave benefit policy for its employees.The policy allows city employees one day of paid sick leave per month and permits them to accumulate sick leave that they do not take.Sick leave vests at the completion of the fifth year of employment, and unused sick leave is paid in cash upon termination or retirement.During the fiscal year ended 6/30/15, city employees who are paid from the general fund earned $2.8 million of sick leave, of which $1.0 was taken.Of the balance, the city estimates that $0.2 million will be taken in the next 60 days, $0.6 million will be taken in the next five years, $0.4 million will vest, and $0.6 million will never be taken.