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.