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    WEEK 6 - Acc

    Uploaded by

    Yusef Shaqeel
    The document calculates long-service leave benefits totaling $329,914 for employees at different salary levels and years of service. It records a debit to the Cost of Employee Benefits account and credit to the Long-service leave provision account for $133,969 to recognize the provision. Discounting of long-term benefits like long-service leave is required by accounting standard AASB 119 to reflect expected future salary levels when the leaves will be taken.

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    WEEK 6 - Acc

    Uploaded by

    Yusef Shaqeel
    23 views2 pages
    The document calculates long-service leave benefits totaling $329,914 for employees at different salary levels and years of service. It records a debit to the Cost of Employee Benefits account and credit to the Long-service leave provision account for $133,969 to recognize the provision. Discounting of long-term benefits like long-service leave is required by accounting standard AASB 119 to reflect expected future salary levels when the leaves will be taken.

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    week 6

    Original Title

    WEEK 6_Acc

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    The document calculates long-service leave benefits totaling $329,914 for employees at different salary levels and years of service. It records a debit to the Cost of Employee Benefits account and credit to the Long-service leave provision account for $133,969 to recognize the provision. Discounting of long-term benefits like long-service leave is required by accounting standard AASB 119 to reflect expected future salary levels when the leaves will be taken.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    23 views2 pages

    WEEK 6 - Acc

    Uploaded by

    Yusef Shaqeel
    The document calculates long-service leave benefits totaling $329,914 for employees at different salary levels and years of service. It records a debit to the Cost of Employee Benefits account and credit to the Long-service leave provision account for $133,969 to recognize the provision. Discounting of long-term benefits like long-service leave is required by accounting standard AASB 119 to reflect expected future salary levels when the leaves will be taken.

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    “WEEK 6”

    PART A

    Calculation of the leave-benefit total amount

    Total Years Current Total Rate of Total years Expected

    of S-L Salary Employees Inflation to Maturity Salary


    Net Salary Entitlement

    Three 1,200,000 Twelve 14,400,000 One percent Seven 15,438,749 1,157,906

    dollars dollars dollars dollars

    One 8 lac dollars Ten 8,000,000 One percent Nine 8,749,482 218,737

    dollars dollars dollars

    Calculation of accumulated (total) long-service leaves benefit as on June 30, 2020

    Total Years Total years Corporate Present Possibility Long-

    of S-L to Maturity Rate of Value or service leaf


    Entitlement
    Bond benefit
    Probability

    Three Seven 1,157,906 0.06 770,074 40% or 0.4 308,029

    dollars dollars dollars

    One Nine 218,737 0.08 109,423 20% or 0.2 21,885

    dollars dollars dollars


    The formula used to calculate the present value:

    The amount of total long-service leave benefit is 329,914 dollars.

    PART B

    329,914 dollars is the amount that should be recorded as the provision for L-S (long-service)

    leave.

    PART C

    Debit: Cost of Employee Benefits A/c $133,969

    Credit: Long-service leave provision $133,969

    (To record the provision for long-service)

    PART D

    The long-term benefits, which are also called benefits related to annual leaves, are needed to be

    discounted as per AASB 119 (revised edition). The discount on such benefits allows achieving

    the levels of salary that are expected in the coming years when it is projected that the leaves will

    be taken.

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