Instructions: Type your answer in memo format. Your response should be a maximum

ID: 2420858 • Letter: I

Question

Instructions: Type your answer in memo format. Your response should be a maximum of two paragraphs per mini-case (½ to ¾ of a page). Use the following rules: double-space, 1” margins, Times New Roman. You must cite the appropriate source from the FASB Codification in your response. Citing complete sentences out of the Codification will hurt your grade. Please use your own words in your response.

Case: The Justin Company’s fiscal year ends on June 30. Its employees (with at least three months of experience) are entitled to 12 paid sick days annually for each calendar year beginning on January 1. An employee not taking his/her earned sick days would receive payment thereon on December 31 of that year. How should Justin record and measure such a liability as of June 30th?

Explanation / Answer

Statment No 43

It required the employer to accrue liability with reference to the future absences for which employee is enttitled to receive compensation.

Thus ASC 710 - 10- 25 Requires to accrue liability if following conditions are met

1)the rifht vests or accumulate

2) it is likely that the compensation will be paid

3) The amount to be paid can be estimated

4) The compensation should relate to servises already rendered.