Morgan Company determined that (1) it has a material obligation relating to employees’ rights to receive compensation for future absences attributable to employees’ services already rendered, (2) the obligation relates to rights that vest, and (3) payment of the compensation is probable. The amount of Morgan’s obligation as of December 31, 2007 is reasonably estimated for the following employee benefits:
|
Vacation pay |
$100,000 |
|
Holiday pay |
25,000 |
What total amount should Morgan report as its liability for compensated absences in its December 31, 2007 balance sheet?
a. $0
b. $25,000
c. $100,000
d. $125,000