Calculate the expected annual sick-leave expense

Reference no: EM132670105

Question 1: When an organisation recognises a provision and related expense for annual leave, and a provision for long-service leave for its employees, the risk to employees that they will not be paid these amounts that have been provided is effectively zero. Is this true or false? Why?

Question 2: According to AASB 119, how should an employer's obligation for employee benefits be measured?

Question 3: Some employers will pay out employees for any unused sick-leave entitlements if they leave the organisation, whereas in other organisations employees forfeit this entitlement when they leave.

Required: Explain how these different types of sick-leave entitlements are treated for accounting purposes.

Question 4: Bear Island Ltd has a weekly payroll of $300 000. The employees receive entitlements to two weeks' sick leave per year. The sick-leave entitlements are classified as non-vesting. Past experience, and experience within the industry, suggest that 60 per cent of employees will use their full two weeks' entitlement each year; 20 per cent of employees will take one week's sick leave each year; and 10 per cent of employees will take one day's sick leave each year.

Required: (a) Calculate the expected annual sick-leave expense for Bear Island Ltd (on the basis of average salaries).

(b) Provide the journal entries necessary to recognise the sick-leave entitlement expense as it accrues.

i. The sick leave was vesting;

ii. The sick leave was non-accumulating and non-vesting.

Reference no: EM132670105

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