At the beginning of 20x1, a company announced a sabbatical plan for senior executives. After 9 years of consecutive service, those eligible will be allowed 3 months off at 90% of their salary. Three executives currently earning $250,000 each (measured at the end of 20x1) are eligible for the sabbatical plan. It is expected that two will earn the sabbatical leave (the other is expected to leave the company before the 9 years’ service requirement). Salary increases are expected to average 3% per year (i.e. their salary for 20x2 will be $250,000 x 1.03 = 257,500). No entries were made for this plan yet. Any service component of the sabbatical plan should be debited to administrative expenses. Required – Assuming the yield on high quality corporate bonds is 4%, prepare the journal entry related to this sabbatical plan at December 31, 20x1
At the beginning of 20x1, a company announced a sabbatical plan for senior executives.
After 9 years of consecutive service, those eligible will be allowed 3 months off at 90%
of their salary. Three executives currently earning $250,000 each (measured at the end of
20x1) are eligible for the sabbatical plan. It is expected that two will earn the sabbatical
leave (the other is expected to leave the company before the 9 years’ service requirement).
Salary increases are expected to average 3% per year (i.e. their salary for 20x2 will be
$250,000 x 1.03 = 257,500). No entries were made for this plan yet. Any service
component of the sabbatical plan should be debited to administrative expenses.
Required – Assuming the yield on high quality corporate bonds is 4%, prepare the
entry
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