ASSIGNMENT
Question 1
Plath Ltd commenced operations on 1 July 2011 with 24 employees. On 30 June 2014 all these employees remained with the company. On 1 July 2013 Plath Ltd engaged another 30 employees but by 30 June 2014 only 20 of those new employees were still in employment with Plath Ltd.
The workplace Enterprise Bargain Agreement entitles employees to 13 weeks long-service leave (LSL) after serving for 10 years with Plath Ltd. At 30 June 2014 Plath Ltd estimates the following:
the combined annual salaries of all employees hired on 1 July 2011 is $2,400,000;
the combined annual salaries of all current employees hired on 1 July 2013 is $1,600,000;
the probability that employees hired on 1 July 2011 will continue to be employed until entitled to LSL is 30% per cent; and
the probability that employees hired on 1 July 2013 will continue to be employed until entitled to LSL is 20% per cent.
Salaries are expected to increase by 5% per cent per annum.
At 30 June 2013 the provision for long-service leave was $18,000.
The interest rates on high-quality corporate bonds are as follows:
1 July 2013
30 June 2014
Corporate Bonds Maturing in 7 years
4%
6.0%
Corporate Bonds Maturing in 8 years
5%
8.0%
Corporate Bonds Maturing in 9 years
5%
8.0%
Corporate Bonds Maturing in 10 years
6%
10.0%
Required
1. Calculate the total accumulated long-service leave benefit as at 30 June 2014.
2. Identify the relevant AASB and determine the amount that should be reported for the long-service leave provision as at 30 June 2014. Show correct entries in a T account.
3. Prepare the journal entry for the provision for long-service leave for 30 June 2014 in accordance with the AASB identified in (2) above.
8 marks
You must show all workings clearly in order to obtain marks. Answers unsupported by clear workings do not receive marks. The marks are for correct calculations.
Question 2
On 1 July 2010 Pink Ltd purchased land at a cost of $6,000,000 in the…