Question

Sydney Bay Ltd has five employees. According to their particular employment award, long-service leave can be taken after 12 years, at which time the employee is entitled to 10 weeks' leave. If an employee were to leave before the completion of 12 years' service, no entitlement would be paid. Years until LSL vests 2 10 Name of employee Black White Brown Green Purple Current salary ($) Years of service 40 000 40 000 50 000 60 0008 70 000 41 6 000 4 10 2 High-quality corporate bond rates exist with periods to maturity that exactly match the various periods that must still be served by the employees before LSL entitlements vest with them. Corporate bond period to maturity 10 8 Bond rate (%) 8.0 7.0 6.5 6.0 5.8 6 4 The projected inflation rate for the foreseeable future is 2 per cent. The projected probabilities that the employees will stay long enough for the LSL to vest-that is, for a total of 12 years-are as follows: Probability (%) that LSL will vest Name Black White Brown Green Purple REQUIRED 1. Calculate Sydney Bay's current obligation for long-service leave. 2. If the opening provision for long-service leave is $12 500, provide the journal entry to record Alexandra Bay's long-service leave expense.

Answer 1

Pg No - solution : - Given data; A) Name of Employee Projetec Salary Black white Arcumalaled 15 kemfis years until est obligatione 48,760 1,563 724 3,004 1,748 46,866 56,308 Brown 5,314 3,710 64,946 8326 .6,595 Green Purple 72,828 10,426 11, 671 LSL liability, - 109 350 11855 4,617 9,383 16,314 Notes: or is determind by the 1). The projected salary is deter, calculations: Current Salary x C1 + m plation rate)n, The Growth rate for wages and will continue to be 2% for Black, ,

$40,000 X (1002)x10 Pg No- $48,760 3). Accumulated ist Benfit is determined by the following Accumulated LSL Enti Hement = (year of Employement) /caumber of years Required) x works of LSL Glittenent % 52 x projected Salary 3). - 2112 * 10/sa * $48,760 = $1563 The present value of tong- Service leave calculations is.- · Accumulated long Service leave benfit / (1+ appropriate government Bond rate) in . $1,563/(108) 10 $724 4). probability that long - Service leave will be taken: - The probability that long Service leave will be taken would be determined by dite Reference to prior Experience with in the industry. . $724 x 0.15 $109

After leave considering all five Employees, that long provision at the end of the period should Pg No-③ Service total $ 16,314. B). If the Carrying Amount of provision account is $10,500 then it must be Raised to $16, 314 Resulting in a LS2 Expense for the year of $3,814 • Long Service leave: Expense. D. $ 3.814 • provision for long Service leave Cy- $3914 - O