About the accounting treatment of sabbatical leave

Assignment Help Financial Accounting

Reference no: EM131263882

Case: Professor Pearl (a client) comes to you for help about the accounting treatment of sabbatical leave. Professor Pearl tells you that his university’s accountant says that because Professor Pearl receives a “sabbatical” once every seven years, the cost of that “sabbatical” must be partially accrued in each of the six years leading up to the “sabbatical” year. The result is that the university compensation cost related to Professor Pearl in each year is one-sixth higher than Professor Pearl’s actual annual cash compensation. As a result Professor Pearl’s cash compensation must be reduced by 17% immediately.

Professor Pearl is dismayed. To him, this seems unfair. He reports to you that this “sabbatical” year is not a year in which he relaxes on the beach. Sure he has no classes that year. However, during that year he is required to appear at the organic chemistry lab each day and mentor chemistry graduate students. He enjoys the work, but it is not as if he were really taking a year off. He wants you to help him convince the university accountant that it is not right to “accrue,” in advance, the cost of his “sabbatical” year salary.

Requirements: Your written “help” should come in a typed memo using the headings/format below.

Date

To:

From:

Re:

Facts:

Issue:

Conclusion:

Reference no: EM131263882

Questions Cloud

About interim financial statements : Which of the following is not true about interim financial statements?

Uses the equipment in its exempt function : Clayton owns equipment with an acquisition cost of $700,000, an adjusted basis of $250,000, and a FMV of $450,000. Clayton contributes the equipment to a charity that uses the equipment in its exempt function. Without considering any limitations due ..

Calculate the activity rate per purchase order : Corazon Manufacturing Company has a purchasing department staffed by five purchasing agents. Each agent is paid $28,000 per year and is able to process 4,000 purchase orders. How many purchase orders could be processed by four and a half purchasing a..

Amount and character of recognized gain or loss from sale : A C corporation purchased an office building on January 1, 10X1, for $255,000 (not including the land on which the building was located). On January 1,2017, the corporation sells the building for $375,000. Depreciation of $93,750 was taken on the bui..

About the accounting treatment of sabbatical leave : Professor Pearl (a client) comes to you for help about the accounting treatment of sabbatical leave. Professor Pearl tells you that his university’s accountant says that because Professor Pearl receives a “sabbatical” once every seven years, the cost..

Record the necessary adjusting entries : The information necessary for preparing the 2018 year-end adjusting entries for Winter Storage appears below. Winter's fiscal year-end is December 31. Depreciation on the equipment for the year is $7,000. Record the necessary adjusting entries at Dec..

Increases and decreases in the accounting equation : The following transactions occur for the Hamilton Manufacturers. (a) Provide services to customers on account for $4,500. (b) Purchase equipment by signing a note with the bank for $10,000. (c) Pay advertising of $1,500 for the current month. Analyze..

What is the depreciation charge for the fourth year : Use depreciation by linear function of use. A machine costs $30,000 and will produce 10,000 units and be sold for $6,000. Up to the end of the third year it produced 50,000 units and during the fourth year it produced 10,000 units. What is the deprec..

What is the depreciation charge for the first year : A machine was purchased for $30,000. Shipping charges were $600 and install was $400. It has a useful life of 8 years. At the end of 8 years it will require $900 of dismantling charges to be sold for $6,000. What is the depreciation charge for the fi..

User Account

All Pages