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Homework answers / question archive / 1)California University has a fiscal year ending June 30th
1)California University has a fiscal year ending June 30th. California University (CU) has a policy in which all tenured professors who have worked for CU for a minimum of 2 years may take a one semester sabbatical every 3 years in order to focus exclusively on research. During the sabbatical the professor will still be compensated by CU. As of June 30, 2020 CU estimates that the annual payroll cost for faculty taking sabbaticals in the upcoming fiscal year to be $2,000,000.
Accounting Issue: Is CU required to accrue the cost of the faculty sabbaticals as of June 30, 2020?
As per the given case, The California University has estimated the annual payroll cost for all the faculty taking sabbaticals in the coming fiscal year will be $2,000,000.
To take out such a huge amount from the University, There must be a provision created in regard to the expense of sabbatical leaves. This provision can used to pay off the accrued expense of the payroll in regard to the faculty on sabbatical leaves.
Journal Entry will be made for the provision created to accrue the amount as on June 30-
1- Payroll Cost Dr. $2,000,000 -
To Provision for Payroll - $2,000,000
(For provision created against the annual payroll estimated)
