Question

At the beginning of year 1, a company hired an executive whose contract included the promise of payment of $100,000 in each of years 6, 7, and 8, if the executive is employed at the end of year 5. how should the compensation expense associated with this contract be recorded?

Answer 1

I believe this could be entered as accounts accruable for years 6,7 and 8 in other words it would be recorded at the present time but since it was accruable it would be known and expected in those years and can be prepared for in the future. In years 1-5, this money could gradually be put aside so that it was in place in those 'maturity' years,