Solutions Manual: Financial Reporting

Solutions manual
to accompany
Financial reporting
3 edition
rd
by
Loftus, Leo, Daniliuc, Boys, Luke, Ang and

Byrnes
Prepared by
Belinda Luke
Not for distribution in full. Instructors may post selected solutions

for questions assigned as homework to their LMS.
© John Wiley & Sons Australia, Ltd 2020

Chapter 9: Employee benefits
Comprehension questions
1. What is a paid absence? Provide an example.
Refer to section 9.2. Paid absence refers to an employee entitlement to be paid during certain
absences. Examples include sick leave and annual leave.
2. What is the difference between accumulating and non-accumulating sick leave? How
does the recognition of accumulating sick leave differ from the recognition of non-
accumulating sick leave?
Refer to section 9.2.4. Accumulating sick leave may be carried forward to a future period if the
employee has not taken the leave in the current period. Non-accumulating sick leave may not be
carried forward to a future period. A liability must be recognised for accumulating sick leave
when the employee renders services that increase the entitlement. The liability is measured as the
amount that the entity expects to pay. If the leave is non-vesting, the amount recognised is
affected by the probability that the leave will be taken.
3. What is the difference between vesting and non-vesting sick leave? How does the
recognition of vesting sick leave differ from the recognition of non-vesting sick leave?
Refer to section 9.2.4. If sick leave is vesting, the employee is entitled to cash settlement for
unused leave. If sick leave is non-vesting, the employee has no entitlement to cash settlement of
unused leave. The employer recognises a liability for accumulating sick leave, measured as the
undiscounted amount expected to be paid. The entity will have good reason to expect that all
vested accumulating sick leave will be paid. However, if sick leave is not vesting, a liability is
recognised for proportion of accumulated sick leave that the entity expects to be taken by its
employees.
4. Explain how a defined contribution superannuation plan differs from a defined benefit
superannuation plan.
Refer to sections 9.4 and 9.5. Under a defined contribution superannuation plan the employer
pays fixed contributions into a fund. Employees’ benefits are a function of the level of
contributions paid and the return achieved by the fund on the investment of plan assets. The
employer has no obligation to make further payments if the fund is unable to pay all the benefits
accruing to members for past service.
In a defined-benefit superannuation plan, the benefits received by members on retirement are

determined by a formula reflecting their years of service and level of remuneration, rather than
© John Wiley and Sons Australia Ltd, 2020 9.2

Solutions manual to accompany Financial reporting 3e by Loftus et al.. Not for distribution in full. Instructors may
post selected solutions for questions assigned as homework to their LMS.
the performance of the fund. The employer has an obligation to pay further contributions if the
fund is unable to pay members’ benefits.
5. During October 2008 there was a sudden global decline in the price of equity securities
and credit securities. Many superannuation funds made negative returns on
investments during this period. How would this event affect the wealth of employees
and employers? Consider both defined benefit and defined contribution
superannuation funds in your answer to this question.
Refer to sections 9.4 and 9.5. In a defined contribution fund the employees bear the risk of low
or negative returns on the investment of plan assets because the benefits paid on retirement are a
function of the level of contributions and the return achieved on plan assets. Thus, the employer
is not directly affected by the poor performance of the defined contribution fund because it has
no obligation for additional contributions if the fund is unable to pay benefits to members on
retirement.
Members of defined benefit plans would not be affected by the negative returns achieved by the
fund. Their benefits are defined in terms of their years of service and level of remuneration,
rather than by the performance of the fund. The employer has an obligation for the excess of the
defined benefit over the plan assets. Thus a decline in the value of investments held by the fund
may increase the employer’s obligation to the fund.
6. Explain how an entity should account for its contribution to a defined contribution
superannuation plan in accordance with AASB 119/IAS 19.
Refer to section 9.4. Contributions payable to defined contribution funds are recognised as
expenses in the period that the employee renders services, unless another standard permits the
cost of employment benefits to be allocated to the carrying amount of an asset, such as inventory.
If the amount paid to the defined contribution fund by the entity during the year is less than the
amount payable in relation to services rendered by employees, a liability for unpaid contributions
must be recognised. The liability is measured at the undiscounted amount payable unless it is due
more than 12 months after the end of the period, in which case it is discounted.
7.Compare the off-balance sheet approach to accounting for a defined benefit post-employ-
ment plan with the net capitalisation approach adopted by AASB 119/IAS 19. Can these
approaches be explained by different underlying views as to whether a deficit or sur-
plus in the fund meets the definition of a liability or asset of the sponsoring employer?
The off-balance sheet approach ignores any surplus or deficit in the defined benefit post-
employment plan. Under this approach, the accounting is similar to accounting for a defined
contribution fund, for which contributions are recognised as expenses in the period in which the
employee renders services. This approach can be justified conceptually if adopting the view that
a surplus in the fund is not an asset of the employer, who cannot direct a surplus to be used as a

resource to pursue its own objectives; and a deficit is not a liability of the employer in the
absence of a legal obligation to pay for any shortfall in the fund. However, this argument is
premised on a narrow view assets and liabilities. Adopting a broader view, the expected cost
savings, in the form of lower contributions, constitute future economic benefits that are expected
to be derived from the surplus. Similarly, the deficit gives rise to a constructive obligation
because the employer may find it difficult to attract and retain staff, or face opposition from
unions, if it did not make additional contributions to enable the fund to pay benefits to members.
This broader view is reflected in the net capitalisation approach because the surplus (deficit) of
the plan assets is recognised as an asset (liability) by the employer.
8. In relation to defined benefit post-employment plans, paragraph 56 of AASB 119/IAS

19 states, “… the entity is, in substance, underwriting the actuarial and investment
risks associated with the plan”. Evaluate whether the requirements for the recognition
and measurement of the net defined benefit liability reflect the underlying assumptions
about the entity’s risks.
The standard reflects the view that a deficit in the post-employment fund represents a
constructive obligation because the entity (the employer) effectively underwrites the actuarial
and investment risks associated with the plan. Similarly, a surplus represents an asset in the form
of future savings in contributions. The recognition of a liability to the extent that the present
value of the accrued benefits exceed the fair value of plan assets is consistent with this view; it
provides a present value measure of the risk to the entity of having to pay additional
contributions in future to enable the fund to pay accrued benefits to members for services that
have already been rendered.
While the question focuses on the requirements for a defined benefit liability, some further
comments are offered in relation to the accounting requirements for a net defined benefit asset.
Conversely, a surplus in the fund represents potential savings in the form of reduced
contributions resulting from past actuarial and investment gains. However, assets are resources
controlled by the entity form which future economic benefits are expected to flow to the entity.
Accordingly, AASB 119/IAS 19 limits the carrying amount of the net superannuation asset to the
greater of the surplus and ‘the present value of any economic benefits available in the form of
refunds from the plan or reductions in future contributions of the plan’.
9. Identify and discuss the assumptions involved in the measurement of a provision for
long service leave. Assess the consistency of these requirements with the fundamental
qualitative characteristics of financial information prescribed by the conceptual
framework.
Refer to section 9.6. Accounting for long service leave requires estimation of when the leave will
be taken, projected salary levels and the proportion of employees who will continue in the
entity’s employment long enough to become entitled to long service leave. It is necessary to
make assumptions about when employees will take long service leave, which may be any time
after they become entitled. The estimation of the timing of when leave will be taken affects

estimates of projected salaries and wages and the discounting of the defined benefit. The
estimation of projected salary levels may be affected by assumptions about the rate of inflation
as well as promotion. The likelihood of promotion may differ among different categories of
employees, such as engineers, graduate trainees and unskilled workers. The proportion of
employees who will become entitled to long service leave may vary from one location to
another, and is usually considered to be increasing with the period of past employment.
Employees who are approaching entitlement are assumed to be less likely to leave before their
long service leave vests, because the loss of long service leave entitlement would be viewed as a
cost of changing employment.
The fundamental qualitative characteristics of financial information prescribed by the Conceptual

Framework are relevance and faithful representation. The liability for long service leave is
required to be measured as the present value of the amount expected to be paid to settle the
obligation. The focus on future cash flows required to settle the obligation reflects the
fundamental characteristic of relevance because users of financial statements need information
with which to assess the entity’s prospects for future not cash inflows (Conceptual Framework,
paragraph OB4). However, the estimation of future cash flows introduces measurement
uncertainty that can detract from faithful representation. The use of historical patterns of
employee retention and actuarial estimates can enhance the faithful representation of liabilities
for long service leave.
10. Explain the projected unit credit method of measuring and recognising an obligation
for long-term employee benefits? Illustrate your answer with an example.
Refer to section 9.6. Under the projected unit credit method the obligation for long-term
employee benefits is measured by calculating the present value of the expected future payments
that will result from employee services provided to date. For example, if employees will be
entitled to 13 weeks of long service leave after 10 years of employment, 30% of the amount
expected to be paid in the future is recognised for employees who have provided three years of
service.

Case studies
Case study 9.1
Termination benefits
The board of directors of Launceston Ltd met in June 2022 and decided to close down a
branch of the company’s operations when the lease expired in the following February. The
chief financial officer advised that termination benefits of $2 million are likely to be paid.
Required
Advise the company’s accountant whether the company should recognise a liability for
termination benefits in its financial statements for the year ended June 2022. Explain your
advice with reference to the requirements of AASB 119/IAS 19.
Given the timeframe for the expected payments is within 12 months after the end of the reporting
period, the amount should be recorded as a current liability (paragraph 8, AASB 119/IAS 9).
Case study 9.2
Vesting entitlements
Monash Ltd is a newly formed company and is formulating its policies in terms of
employee benefits. The company would like to offer employees payment for any
accumulated unused sick leave if they resign from the company.
Required
Explain to the CEO the effect on the financial statements if sick leave entitlements are
vesting versus non-vesting.
Where payment is made for any accumulated unused sick leave, such leave is referred to as
vesting. In this case, records of accumulated unused leave must be kept and the associated
liability recorded in the company’s financial statements. If there is no entitlement to payment for
unused sick leave on resignation/termination, such leave is referred to as non-vesting and only
amounts due and payable within the next 12 months would be recorded as a current liability in
the company’s financial statements.
Case study 9.3
Long service leave
The accountant of Oxford Ltd believes that long service leave should not be considered as a
liability in the accounts until employees have commenced their tenth year of service, given
this leave entitlement only applies to Oxford Ltd employees after 10 years of continuous
service.

Required
Advise the accountant on whether this approach is acceptable, and what requirements exist
under AASB 119/IAS 19.
Under AASB119/IAS 9, long service leave accrues to employees as they provide services to the
entity, even though there may be no legal entitlement to the leave until after 10 years. Hence, net
present value calculations of the expected future obligation are required. This is normally done
using the projected unit credit method, which involves estimating when the leave will be taken,
projected salary levels at that time, and the proportion of employees who will remain in
employment to qualify for the leave.
Case study 9.4
Bonuses
Bond Ltd pays bonuses to its staff 3 months after year-end, provided profit targets are met
and staff remain employed with the company at the time the bonuses are paid. At 30 June
2022 the company determines it has exceeded its profit target for the year, but prefers not
to record a liability for bonuses payable until it confirms how many staff continue to be
employed with the company in September, given there has been significant variation in
turnover rates in recent years.
Required
Advise whether the proposed approach is acceptable.
The proposed approach is not acceptable under AASB 119/IAS 19 if the company has a present
legal or constructive obligation to make such payments as a result of past events (meeting their
profit target), and a reliable estimate of the obligation can be made.
While Bond has experienced significant variation in staff turnover rates in recent years, it should
be possible to make a reasonable estimate of the liability for bonus payments.

Application and analysis exercises
Exercise 9.1
Accounting for the payroll
Kingfisher Ltd pays its employees on a monthly basis. The payroll is processed on the 6th
day of the month and payable on the 7th day of the month. Gross salaries for July were
$600 000, from which $150 000 was deducted in tax. All of Kingfisher Ltd’s salaries are
accounted for as expenses. Deductions for health insurance were $12 000. Payments for
health insurance and employee income taxes withheld are due on the 15th day of the
following month.
Required
1. Prepare all journal entries to record the July payroll, the payment of July salaries and
the remittance of deductions.
2. Calculate the balance of the Accrued Payroll account at the end of July.
(LO2)
1.
6 July Wages and salaries expense Dr 600 000
Accrued payroll Cr 600 000
(Payroll for July)
7 July Accrued payroll Dr 438 000

Cash Cr 438 000
(Payment of net salaries for July)
15 August Accrued payroll Dr 12 000

Cash Cr 12 000
(Payment of health insurance payroll deductions)

Cash Cr 150 000
(Payment of payroll deductions for withheld income tax)
2. $162 000 credit ($600 000 - $438 000), as all June payroll deductions would have been
remitted during July.
Exercise 9.2
Accrual of wages and salaries
Zhang Ltd has a weekly payroll of $140 000. The last payroll processed before the end of
the annual reporting period was for the week ended Friday 24 June. Employees do not
work during weekends.
Required
Prepare a journal entry to accrue the weekly payroll as at 30 June. (LO2)
Wages and salaries must be accrued for four business days after Friday 24 June. that is, Monday
27 June – Thursday 30 June.
30 June Wages and salaries expense Dr 112 000

Accrued wages and salaries Cr 112 000
(Accrual of payroll for business days 27-30 June: 4/5 x $140 000 = $112 000)

Exercise 9.3
Accounting for the payroll
Malee Ltd pays management on a monthly basis and staff on a fortnightly basis. Payroll is
processed and paid on the 1st of each month for management, and the 1st and 15th of each
month for staff. Gross management salaries per month are $360 000 (less $162 000 tax).
Gross staff wages per month are $540 000 (less $175 500 tax), and paid in equal instalments
on the 1st and 15th of each month. Tax is remitted on the 15th of the following month.
Required
Prepare journal entries for January payroll. (LO2)
1 Jan Wages expense Dr 270 000

Salaries expense Dr 360 000
Cash Cr 380 250
(Payroll for first half of January, net salary and wages $198 000 + $182 250)
15 Jan Wages expense Dr 270 000

Cash Cr 182 250
(Payroll for second half of January)
15 Feb Accrued payroll Dr 337 500

Cash Cr 337 500
(Payment of payroll deductions for income tax withheld)

Exercise 9.4
Accounting for sick leave
Magpie Ltd has 80 employees who each earn a gross wage of $120 per day. In an attempt to
reduce absenteeism, Magpie Ltd introduced a new workplace agreement providing all
employees with entitlement to 5 days of non-vesting, accumulating sick leave per annum,
effective from 1 July 2021. Under the previous workplace agreement, all sick leave was
non-cumulative. During the year ended 30 June 2022, 240 days of paid sick leave were
taken by employees. It is estimated that 70% of unused sick leave will be taken during the
year ended 30 June 2023 and that 30% will not be taken at all.
Required
Prepare a journal entry to recognised Magpie Ltd’s liability, if any, for sick leave at 30
June 2022. (LO2)

Provision for sick leave Cr 13 440
(Accrual of sick leave: 70% x (80 x 5 – 240) x $120 = $13 440)

Exercise 9.5
Omu Ltd has 220 employees who each earn a gross wage of $145 per day. Omu Ltd
provides 5 days of paid non-accumulating sick leave for each employee per annum. During
the year, 160 days of paid sick leave and 20 days of unpaid sick leave were taken. Staff
turnover is negligible.
Required
Calculate the employee benefits expense for sick leave during the year and the amount that
should be recognised as a liability, if any, for sick leave at the end of the year. (LO2)
Employee benefits for sick leave during the year: 160 days x $145 per day = $23 200. Omu Ltd
should not recognise a liability for sick leave because it is non-cumulative.

Exercise 9.6
Accounting for annual leave
Burung Ltd provides employees with 4 weeks (20 days) of annual leave for each year of
service. The annual leave is accumulating and vesting up to a maximum of 6 weeks. Thus,
all employees take their annual leave within 6 months after the end of each reporting
period so that it does not lapse. Burung Ltd pays a loading of 17.5% on annual leave; that
is, employees are paid an additional 17.5% of their regular wage while taking annual leave.
Refer to the following extract from Burung Ltd’s payroll records for the year ended 30
June 2019.
AL 1 July 2021 Increase in entitlement AL taken

Employee Wage/day (days) (days) (days)
Chand $150 8 20 15
Kettle $115 5 20 12
Sander $140 4 20 10
Zhou $100 6 20 15
Required
Calculate the amount of annual leave that should be accrued for each employee. (LO2)
Employee Wage, Change in AL AL 30/6/22 AL accrual

per day entitlement in days (col. 2 x col. 4 x 117.5%)
Chand $150 8+20-15 13 2 291
Kettle $115 5+20-12 13 1 757
Sander $140 4+20-10 14 2 303
Zhou $100 6+20-15 11 1 293

Exercise 9.7
Accounting for profit-sharing arrangements
Ren Ltd has a profit-sharing arrangement in which 1% of profit for the period is payable
to employees, paid 3 months after the end of the reporting period. Employees’ entitlements
under the profit-sharing arrangement are subject to their continued employment at the
time the payment is made. Based on past staff turnover levels, it is expected that 95% of the
share of profit will be paid. Ren Ltd’s profit for the period was $70 million.
Required
Prepare a journal entry to record Ren Ltd’s liability for employee benefits arising from the
profit-sharing arrangement at the end of the reporting period. (LO2)
Provision for employee benefits Cr 665 000
(Accrual of employee benefits for profit-sharing arrangements: 95% x 1% x $70
000 000 = $665 000)

Exercise 9.8
Accounting for the payroll and accrual of wages and salaries
Lyrebird Ltd pays its employees on a fortnightly basis. All employee benefits are
recognised as expenses. The following information is provided for its July and August
payrolls:
July August
$ $ $ $
Fortnightly payroll 680 000 800 000

820 000 700 000
Gross payroll for the month 1 500 1 500
000 000
Deductions payable to:
Taxation authority 260 000 255 000
Health fund 20 000 20 000
Community charity 4 000 4 000
Union fees 6 500 6 500
Total deductions for the month 290 500 285 500
Net wages and salaries paid
14 July, 11 August 553 775 648 230
28 July, 25 August 655 725 1 209 566 270 1 214
500 500
1 500 1 500
000 000
The two fortnightly payrolls in August were for the fortnight ended Friday 7 August and
Friday 21 August. The payrolls were processed and paid on the following Monday and
Tuesday respectively. Payroll deductions are remitted as follows.
Health fund deductions 7th day of the following month

Union fees 7th day of the following month
Taxation authority 14th day of the following month
Community charity 21st day of the following month
Required

1. Prepare all journal entries to account for the August payroll and all payments relating
to employee benefits during August.
2. Prepare a journal entry to accrue wages for the remaining days in August not included
in the final August payroll. Use the same level of remuneration as per the final payroll
for August.
(LO2)
1.
Cash Cr 20 000
(Payment of July health insurance payroll deductions)
Accrued payroll Dr 6 500
Cash Cr 6 500
(Payment of July payroll deductions for union fees)
10 August Wages and salaries expense Dr 800 000

(Payroll for fortnight ended 7/8)

Cash Cr 648 230
(Payment of net wages & salaries)

Cash Cr 260 000
(Payment of employee income tax withheld in July)

Cash Cr 4 000
(Payment of July payroll deductions for charity donations)

(Payroll for fortnight ended 21/8)

Cash Cr 566 270
(Payment of net wages & salaries)
2.
Accrued wages and salaries Cr 420 000
(Accrual of wages and salaries for 6 business days Mon 24-28/8, 31/8; Daily
wages $700 000/10 days = $70 000; 6 days x $70 000 per day = $420 000)


Exercise 9.9
Niao Ltd provides 4 weeks (20 days) of accumulating vested annual leave for each year of
service. The company policy is that annual leave must be taken within 6 months of the end
of the period in which it accrues. Annual leave is paid at the base salary rate (which
excludes commissions, bonuses and overtime). A 17.5% loading is applied to annual leave
payments.
The following summary data is derived from Niao Ltd’s payroll records for the year ended
30 June 2022. Base pay rates have increased during the year. The amounts shown are
applicable at 30 June 2022.
Additional information
After leave taken during the year had been recorded, Niao Ltd’s trial balance revealed that
the provision for annual leave had a debit balance of $262 460 at 30 June 2022.
Required
Prepare journal entries to account for the liability for annual leave at 30 June 2022. (LO2)
Category Pay/day Op bal Increase AL taken Clos bal. Loading Liability

$ Days Days Days Days $
Managers 440 100 200 260 40 0.175 20 680
Sales staff 220 150 600 630 120 0.175 31 020
Office workers 110 120 400 387 133 0.175 17 190
Other 100 60 200 240 20 0.175 2 350
Liability 30 June 71 240Cr
Bal. of provision 262 460Dr
Accrual 333 700
Closing balance of annual leave accumulation (in days) = Opening balance + accumulation
during the year – Annual leave taken; e.g. Managers: 100 + 200 – 260 = 40 days
Accrual = Days accumulated at the end of the period x basic pay rate x (1 + 0.175); e.g.
Managers: 40 days x $440 per day x (1 + 0.175) = $20 680
30/6/2022 Wages and salaries expense Dr 333 700

Provision for annual leave Cr 333 700

(Accrual of employee benefits arising from profit-sharing arrangements)

Exercise 9.10
Assume the same details as in exercise 9.9, except that Niao Ltd’s trial balance showed the
provision for annual leave had a credit balance of $62 640.
Required
1. Prepare journal entries to account for the annual leave liability at 30 June 2022.
2. Prepare journal entries to account for the annual leave liability at 30 June 2022 if the
provision for annual leave had a credit balance of $62 640, but there was no loading
applied to annual leave payments.
(LO2)
1.
Provision for annual leave Cr 8 600
($71 240 – $62 640 = $8 600)
2.
Category Pay/day Op bal Increase AL taken Clos bal. Loading Liability

$ Days Days Days Days $
Managers 440 100 200 260 40 0 17 600
Sales staff 220 150 600 630 120 0 26 400
Office workers 110 120 400 387 133 0 14 630
Other 100 60 200 240 20 0 2 000
Liability 30/6 60 630 Cr
Bal of provision 62 640 Cr
Accrual 2 010 Dr
Closing balance of annual leave accumulation (in days) = Opening balance + accumulation
during the year – Annual leave taken; e.g. Managers: 100 + 200 – 260 = 40 days
Accrual = Days accumulated at the end of the period x basic pay rate x (1); e.g. Managers: 40
days x $440 per day x (1) = $17 600
30/6/2022 Provision for annual leave Dr 2 010

Wages and salaries expense Cr 2 010

Exercise 9.11
Drake Ltd opened a call centre on 1 July 2021. The company provides 1 week (5 days) of
sick leave entitlement for the employees working at the call centre. The following
information has been obtained from Drake Ltd’s payroll records and actuarial assessments
for the year ended 30 June 2022. The column headed ‘Term. in 2019’ indicates the leave
entitlement pertaining to service of employees whose employment was terminated during
the year. The actuary has estimated the percentage of unused leave that would be taken
within 12 months if Drake Ltd allowed leave to accumulate. Due to high staff turnover, the
remaining leave would lapse (or be settled in cash, if vesting) within 1 year after the end of
the reporting period.
Current Leave taken Estimated Estimated
Base Term. in leave used termination
Employee pay/day service in 2022 2022 2022 2022
category $ (days) (days) (days) % %
Supervisor 150 30 20 3 90 10

s
Operators 90 500 400 60 70 30
Required
Calculate the employee benefits expense for sick leave for the year and the amount that
should be recognised as a liability for sick leave at 30 June 2022, assuming that sick leave
entitlements are:
1. non-accumulating
2. accumulating and non-vesting
3. accumulating and vesting.
(LO2)
There is no opening balance of sick leave, even if accumulating, because all employees
commenced in the current year.
Provision for sick leave:
Current Days Closing Accum. Exp. to be Provision

Category Wage/day Service taken Term. bal. 30/6/22 used
$ Days Days Days $ % $
Supervisors 150 30 20 3 7 1 050 90 945
Consultant 90 500 400 60 40 3 600 70 2 520
c) 4 650 b) 3 465
1. Non-accumulating sick leave is recognised when the leave is taken.

Employee Base pay / Leave taken Employee Provision for sick leave
category day in 2022 benefits
expense
$ Days $ $
Supervisors 150 20 3 000 Nil
Operators 90 400 36 000 Nil
$39 000 Nil
Explanation: there is no obligation for unused sick leave at the end of the period because it is
non-accumulating. Therefore, Drake Ltd would not recognise a provision for non-accumulating
sick leave.
Accumulating sick leave is recognised when the employee provides a service and the liability is
measured as the nominal amount (if short-term) that is expected to be paid for sick leave arising
from services already provided.
2. Employee benefits expense = leave taken during the period + increase in the provision for sick
leave = $39 000 + $3 465 = $42 465
Amount of liability = $3 465
3. If the accumulating sick leave is vesting, all unused entitlement is expected to be paid.
Employee benefits expense = leave taken during the period + increase in the provision for sick
leave = $39 000 + $4 650 = $43 650
Amount of liability = $4 650.

Exercise 9.12
Accounting for defined contribution superannuation plans
Bachstelze Ltd provides a defined contribution superannuation fund for its employees. The
company pays contributions equivalent to 10% of annual wages and salaries.
Contributions of $60 000 per month were paid for the year ended 30 June 2022. Actual
wages and salaries were $8 million. Three months after the reporting period, there is a
settlement of the difference between the amount paid and the annual amount payable
determined with reference to Bachstelze Ltd’s audited payroll information. The settlement
at 30 September involves either an additional contribution payment by Bachstelze Ltd or a
refund of excess contributions paid.
Required
Prepare all journal entries required during June 2022 for Bachstelze Ltd’s payment of, and
liability for, superannuation contributions. (LO4)
Superannuation payable $800 000

Contributions paid $720 000 ($60 000 x 12)
Superannuation liability $80 000
30/06/22 Superannuation expense Dr 60 000

Cash Cr 60 000
(Superannuation contribution for June)
Superannuation expense Dr 80 000

Superannuation liability Cr 80 000
(Liability for unpaid superannuation contribution for the year)

Exercise 9.13
Accounting for defined benefit superannuation plans
Lily Ltd provides a defined benefit superannuation plan for its managers. The following
information is available in relation to the plan.
2022
$
Present value of the defined benefit obligation 1 July 2021 5 000 000
Fair value of plan assets 1 July 2021 4 750 000
Current service cost 575 000
Contributions paid by Lily Ltd to the fund during the year 500 000
Benefits paid by the fund during the year 600 000
Present value of the defined benefit obligation 30 June 2022 5 375 000
Fair value of plan assets at 30 June 2022 5 023 750
 No past service costs were incurred during the year ended 30 June 2022.
 The interest rate used to measure the present value of defined benefits at 30 June 2021
was 9%.
 The interest rate used to measure the present value of defined benefits at 30 June 2022
was 10%.
 There was an actuarial gain pertaining to the present value of the defined benefit
obligation as a result of an increase in the interest rate.
 The only remeasurement affecting the fair value of plan assets is the return on plan
assets.
 The asset ceiling was nil at 30 June 2021 and 30 June 2022.
 All contributions received by the funds were paid by Lily Ltd. Employees make no
contributions.
Required
1. Determine the surplus or deficit of Lily Ltd’s defined benefit plan at 30 June 2022.
2. Determine the net defined benefit asset or liability that should be recognised by Lily
Ltd at 30 June 2022.
3. Calculate the net interest for the year ended 30 June 2022.
4. Calculate the actuarial gain or loss for the defined benefit obligation for the year ended
30 June 2022.
5. Calculate the return on plan assets, excluding any amount recognised in net interest,
for the year ended 30 June 2022.
6. Present a reconciliation of the opening balance to the closing balance of the net defined
benefit liability (asset), showing separate reconciliations for plan assets and the present
value of the defined benefit obligation.

7. Prepare a summary journal entry to account for the defined benefit superannuation
plan in the books of Lily Ltd for the year ended 30 June 2022.
(LO5)
1. Deficit of the fund = $351 250

Present value of the defined benefit obligation 30 June 2022 $5 375 000
Fair value of plan assets 30 June 2022 55 023 750
Deficit of the fund at 30 June 2022 $ 351 250
2. The net defined benefit liability at 30 June 2022 is $351 250, being the deficit of the fund.
3. Net interest = $22 500
Interest expense component of the defined benefit obligation = $5 000 000 x 9% =$450 000.
Interest income component of the change in fair value of plan assets = $4 750 000 x 9% = $427
500
4. Actuarial gain on remeasurement of the defined benefit obligation = $50 000
Closing present value of defined benefit obligation (DBO) = Opening DBO + interest cost +
current service costs- benefits paid +/(-) actuarial loss (gain)
$5 375 000 = $5 000 000 + $450 000 + $575 000 - $600 000 +/(-) actuarial loss (gain)
Solving for actuarial gain arising on remeasurement of DBO: $5 375 000 - $5 000 000 - $450
000 - $575 000 + $600 000 = - $50 000 actuarial gain
5. Return on plan assets (excluding amount recognised in net interest) = $53 750
Fair value of plan assets at 1 July 2021 $ 4 750 000

+ Interest income 427 500
+ Contributions received by the fund 500 000
- Benefits paid to members ($600 000)
5 077 500
Loss on plan assets excluding interest (53 750)
Fair value of plan assets at 30 June 2022 $5 023 750
6. Reconciliation:
Net defined Defined Plan assets
benefit benefit $
liability obligation
$ $
Balance 1 July 2022 250 000 5 000 000 4 750 000
Interest @ 9% 450 000 427 500
Contributions received by fund 500 000
Benefits paid by fund (600 000) (600 000)
Loss on plan assets excluding interest (53 750)

recognised
Actuarial gain on remeasurement of DBO (50 000)
Balance 30 June 2022 351 250 5 375 000 5 023 750
7. Summary journal entry:
30/6/2022 Superannuation expense (P&L) Dr 597 500

Superannuation expense (OCI) Dr 3 750
Cash Cr 500 000
Superannuation liability Cr 101 250
(Superannuation expense and contributions for the year)
Profit or Other Cash Net

Loss comprehensive DBL(A)
income
$ $ $ $
Balance 1 July 2021 250 000 Cr
Net interest 22 500 Dr
Service cost 575 000 Dr
Contributions paid to the fund 500 000 Cr
Loss on plan assets (ex. interest) 53 750 Dr
Actuarial gain on DBO 50 000 Cr
Journal entry 597 500 Dr 3 750 Dr 500 000 Cr 101 250 Cr
Balance 30 June 2022 351 250 Cr

Exercise 9.14
Some years ago, Bidulgi Ltd established a defined benefit superannuation plan for its
employees. The company has since introduced a defined contribution plan, which all new
staff join when commencing employment with Bidulgi Ltd.
Although the defined benefit plan is now closed to new recruits, the fund continues to
provide for employees who have been with the company for a long time. The following
actuarial report has been received for the defined benefit plan.
2022
$
Present value of the defined benefit obligation 1 Jan. 20 000 000
Past service cost 2 000 000
Net interest ?
Benefits paid 2 100 000
Actuarial loss on DBO 100 000
Present value of the defined benefit obligation 31 Dec. 23 000 000
Fair value of plan assets at 1 Jan. 19 000 000
Return on plan assets ?
Contributions paid to the fund during the year 1 000 000
Benefits paid by the fund during the year 2 100 000
Fair value of plan assets at 30 June 2022 20 130 000
 All contributions received by the funds were paid by Bidulgi Ltd. Employees make no
contributions.
 The interest rate used to measure the present value of the defined benefit obligation was
10% at 31 December 2021 and 31 December 2022.
 The asset ceiling was nil at 31 December 2021 and 31 December 2022.
Required
1. Determine the surplus or deficit of Bidulgi Ltd’s defined benefit plan at 31 December
2022.
2. Determine the net defined benefit asset or liability that should be recognised by Bidulgi
Ltd at 31 December 2022.
3. Calculate the net interest and the return on plan assets for the year ended 31 December
2022.

4. Present a reconciliation of the opening balance to the closing balance of the net defined
benefit liability (asset), showing separate reconciliations for plan assets and the present
value of the defined benefit obligation.
5. Prepare a summary journal entry to account for the defined benefit superannuation
plan in the books of Bidulgi Ltd for the year ended 31 December 2022.
(LO5)
1. Present value of the defined benefit obligation 31 December 2022 $23 000 000
Fair value of plan assets 31 December 2022 20 130 000
Deficit of the fund at 31 December 2022 $ 2 870 000
2. The net defined benefit liability at 31 December 2022 is $2 870 000, being the deficit of the
fund.

Interest expense component of the defined benefit obligation:
Defined benefit obligation brought forward $20 000 000
$23 000 000
Interest income component: $19 000 000 x 10% = $1 900 000
4. Reconciliation:
Net Defined Plan assets
defined benefit $
benefit obligation
liability $
$
Balance 1 January 2022 1 000 000 20 000 000 19 000 000
Revised balance 22 000 000
Interest @ 10% 2 200 000 1 900 000
Contributions received by fund 1 000 000
Benefits paid by fund (2 100 000) (2 100 000)
Return on plan assets excluding interest recognised * 330 000
Actuarial loss on remeasurement of DBO 100 000
Balance 31 December 2022 2 870 000 23 000 000 20 130 000
* Workings for return on plan assets:

Fair value of plan assets 31 December 2022 $20 130 000
Less:
Opening balance $19 000 000
Interest income 1 900 000
Contributions received 1 000 000
Benefits paid (2 100 000) $19 800 000

Return on plan assets ex. interest income $ 330 000
5. Summary journal entry:
31/12/2022 Superannuation expense (P&L) Dr 3 100 000

Superannuation income (OCI) Cr 230 000
Cash Cr 1 000 000
Superannuation liability Cr 1 870 000
(Superannuation expense and contributions for the year)
P&L OCI Cash Net DBL(A)

$ $ $ $
Balance 1 January 2022 1 000 000 Cr
Past service cost 2 000 000 Dr
Net interest 300 000 Dr
Service cost 800 000 Dr
Contributions paid to the fund 1 000 000 Cr
Gain on plan assets (ex. interest) 330 000 Cr
Actuarial loss on DBO 100 000 Dr
Journal entry 3 100 000 Dr 230 000 Cr 1 000 000 Cr 1 870 000 Cr
Balance 31 December 2022 2 870 000 Cr

Exercise 9.15
Pigeon Ltd provides a defined benefit superannuation plan for its managers. The assistant
accountant has completed some sections of the defined benefit worksheet based on
information provided in an actuary’s report on the Pigeon DB Superannuation Fund for
the year ended 30 June 2023.
PIGEON DB SUPERANNUATION FUND

Defined benefit worksheet for the year ended 30 June 2023
Pigeon DB
Pigeon Ltd Superannuation Fund
Net Plan
P&L OCI Bank DBL(A) assets
$’000 $’000 $’000 $’000 DBO $’000 $’000
Balance 30/6/22 1 500 Cr 9 000 7 500 Dr

Cr
Net interest at 10%
Current service cost 600 Cr
Contributions to the 900 Cr 900 Dr
fund
Benefits paid by the 150 Dr 150 Cr
fund
Actuarial loss: DBO 450 Cr
Journal entry
Balance 30/6/23 10 800 9 000 Dr
Cr
Adjustment for asset
ceiling if < deficit
Balance 30/6/23
The asset ceiling was $900 000 at 30 June 2023.
Required
1. Determine the surplus or deficit of the fund at 30 June 2023.
2. Determine the net defined benefit asset or liability at 30 June 2023.
3. Calculate the net interest and distinguish between the interest expense component of the
defined benefit obligation and the interest income component of the change in the fair
value of plan assets for the year ended 30 June 2023.

4. Determine the amount to be recognised in profit or loss in relation to the defined benefit
superannuation plan for the year ended 30 June 2023.
5. Determine the amount to be recognised in other comprehensive income in relation to
the defined benefit superannuation plan for the year ended 30 June 2023.
(LO5)
1. $1 800 000 deficit.
Present value of the defined benefit obligation 30 June 2023 $10 800 000
Fair value of plan assets 30 June 2023 9 000 000
Deficit of the fund at 30 June 2023 $1 800 000
2. The net defined benefit liability at 30 June 2023 is $1 800 000, being the deficit of the fund.
Interest expense component of the defined benefit obligation = $9 000 000 x 10%
= $900 000
Interest income component of the change in fair value of plan assets = $7 500 000 x 10%
= $750 000
4. $750 000.
Net interest $150 000

Service cost 600 000
Superannuation expense $750 000
5. The actuarial loss of $450 000 is recognised in other comprehensive income.

Exercise 9.16
Which of the following items in relation to a defined benefit fund are recognised in (i)
profit or loss and (ii) other comprehensive income in accordance with AASB 119/IAS 19?
(LO5)
1. Current service cost
2. Past service cost incurred during the period
3. Net interest
4. Return on plan assets excluding amounts recognised in net interest
5. Benefits paid to members
6. Current period actuarial gains in relation to the defined benefit obligation
7. Current period actuarial losses in relation to the defined benefit obligation
8. Current period actuarial gains in relation to the assets of the plan
9. Current period actuarial losses in relation to the assets of the plan
10. Contributions paid
i) Recognised in profit or loss:

1. Current service cost
2. Past service cost incurred during the period
3. Net interest
ii) Recognised in other comprehensive income:

4. Return on plan assets excluding amounts recognised in net interest
6. Current period actuarial gains in relation to the defined benefit obligation
7. Current period actuarial losses in relation to the defined benefit obligation

Exercise 9.17
For each of the following scenarios, determine (i) the surplus or deficit in the defined
benefit superannuation fund and (ii) the net defined benefit liability or asset that should be
recognised by the sponsoring employer in accordance with AASB 119/IAS 19. (LO5)
Present value of DBO Fair value of plan assets Asset ceiling

1. $2 600 000 $2 000 000 $Nil
2. $3 100 000 $2 400 000 $Nil
3. $4 000 000 $4 400 000 $200 000
4. $4 800 000 $5 000 000 $500 000
Present value Fair value of Asset (i) Deficit or (ii) Net defined
of DBO plan assets ceiling surplus benefit asset /
liability
(a) $2 600 000 $2 000 000 $Nil $600 000 Deficit $600 000 liability
(b) $3 100 000 $2 400 000 $Nil $700 000 Deficit $700 000 liability
(c) $4 000 000 $4 400 000 $200 000 $400 000 Surplus $200 000 asset
(d) $4 800 000 $5 000 000 $500 000 $200 000 Surplus $200 000 asset

Exercise 9.18
Accounting for long service leave
Victoria Ltd provides long service leave entitlement of 13 weeks of paid leave after 10 years
of continuous employment. The provision for long service leave had a credit balance of
$180 000 at 30 June 2022. During the year ended 30 June 2023, long service leave of $45
000 was paid. At the end of the year, the present value of the defined benefit obligation for
long service leave was $160 000.
Required
Prepare all journal entries in relation to long service leave for the year ended 30 June 2023.
(LO6)
$ $
Defined obligation 30/6/23 160 000
Obligation brought forward 180 000
Less LSL paid (45 000) 135 000
Required increase/LSL expense 25 000
During Provision for long service leave Dr 45 000

2023 Cash Cr 45 000
(Long service leave paid)
30/06/23 Long service leave expense Dr 25 000

Provision for long service leave Cr 25 000
(Increase in liability for LSL)

Exercise 9.19
Finch Ltd provides 1 week (5 days) of accumulating non-vesting sick leave for each year of
service. Sick leave is paid at the base pay rate, which does not include commissions,
bonuses and overtime. The proportion of accumulated sick leave that will be taken is
estimated for each category of employee due to differences in staff turnover rates. The
following summary data is derived from Finch Ltd’s payroll records for the year ended 30
June 2022.
% of unused leave
expected
Sick leave to be taken
Balanc
e b/d Increase in Leave
Base 1 July leave for taken or Within 1 2
Employee pay/day 2021 current lapsed 12 year years
category $ (days) service (days) (days) months later later
Managers 450 120 50 10 20 10 5

Consultants 300 110 100 90 75 10 0
Clerical staff 100 80 100 70 65 9 0
The yield on high-quality corporate bonds at 30 June 2022 is 7% for one-year bonds and
8% for two-year bonds. After leave taken during the year had been recorded Finch Ltd’s
trial balance at 30 June 2022 revealed the provision for sick leave had a credit balance of
$13 000.
Required
1. Prepare journal entries to account for the liability for sick leave at 30 June 2022.
2. State how much of the provision should be classified as a non-current liability.
(LO2 and LO6)
1.
Daily wage Open. bal Current Taken or Clos. bal Accumulated
Category $ Days service Lapsed days Benefit $
Managers 450 120 50 10 160 72 000
Consultants 300 110 100 90 120 36 000
Clerical
staff 100 80 100 70 110 11 000
Closing balance of sick leave accumulation (in days):

= Opening balance + entitlement for service during the year – sick leave taken/lapsed

e.g. Managers: 120 + 50 – 10 = 160 days
Amount of Sick Leave Expected to be Taken

Accum. Within 1 Year 1 Year Later 2 Years Later
Benefit % $ % $ % $
Managers 72 000 20 14 400 10 7 200 5 3 600
Consultants 36 000 75 27 000 10 3 600 0 0
Clerks 11 000 65 7 150 9 990 0 0
48 550 11 790 3 600
Provision for sick leave:
Current - due within one year after balance date – undiscounted $48 550
Non-current
Due one year later, discounted at 7% = $11 790 = $11 019
(1 + .07)
Due 2 years later, discounted at 8% = $3 600 = $3 086
(1 + 0.08)2
Total provision for sick leave at 30 June 2019 $62 655 Cr
Amount per trial balance 13 000 Cr
Accrual $49 655
The amount that is expected to be paid more than one year after the end of the reporting period is
not a short-term benefit (refer to paragraph 5 of AASB 119/IAS 19). Accordingly, it is measured
at present value, consistent with other long-term employee benefits (refer to paragraphs 55 and
57(a) (ii) of AASB 119/IAS 19).

Provision for sick leave Cr 49 655
(Accrual of employee benefits for profit-sharing arrangements)
2. Non-current component of Provision for Sick Leave = $11 019 + $3 086 = $14 105

Exercise 9.20
Oca Ltd provides long service leave for its retail staff. Long service leave entitlement is
determined as 13 weeks of paid leave for 10 years of continued service. The following
information is obtained from Oca Ltd’s payroll records and actuarial reports for its retail
staff at 30 June 2022.
Unit % expected to Annual No. of years Yield on HQ

credit No. of become salary per until corporate
(years) employees entitled employee vesting bonds
1 80 20 $45 000 9 10%
2 70 30 $45 000 8 9%
3 50 50 $45 000 7 9%
4 30 60 $45 000 6 9%
 The estimated annual increase in retail wages is 1% p.a. for the next 10 years, reflecting
expected inflation.
 The provision for long service leave for retail staff at 30 June 2021 was $22 000.
 No employees were eligible to take long service leave during the year ended 30 June
2022.
Required
Prepare the journal entry to account for Oca Ltd’s provision for long service leave at 30
June 2022. (LO6)
Step 1: Estimate the number of employees who are expected to become eligible for long service
leave.
Years of
service % expected to become entitled Total employees Eligible employees
1 20% 80 16
2 30% 70 21
3 50% 50 25
4 60% 30 18
Step 2: Estimate projected salaries = Current salary x Eligible employees x (1 + inflation rate)n
Years of Eligible Current Inflation Period until LSL Projected
service employees salary rate vests (years) salaries
$ $
1 16 45 000 0.01 9 787 453
2 21 45 000 0.01 8 1 023 300
3 25 45 000 0.01 7 1 206 152
4 18 45 000 0.01 6 859 831

Step 3: Determine the accumulated benefit

= Years of service x LSL weeks x projected salaries
Years required for LSL 52
Years of Projected Years of service/Years LSL weeks / Accumulated
service salaries required for LSL 52 benefit
$ $
1 787 453 0.1 0.25 19 686
2 1 023 300 0.2 0.25 51 165
3 1 206 152 0.3 0.25 90 461
4 859 831 0.4 0.25 85 983
Step 4: Measure the present value of the accumulated benefit.
= Accumulated benefit
(1 + i)n
Years of service Accumulated benefit Discount factor* Present value
$ $
1 19 686 0.424098 8 349
2 51 165 0.501866 25 678
3 90 461 0.547034 49 485
4 85 983 0.596267 51 269
134 781
*The discount factors are calculated based on the respective % yields on HQ corporate bonds as
1 / (1 + yield)n, where n is the respective period until LSL vests in years.
The increase in the provision for long service leave can be calculated as $134 781 less the
opening balance, $22 000, because there have been no long service leave payments during the
year. Thus, the long service leave expense for the year ended 30 June 2022 is $112 781.
(Increase in provision for long service leave)

Exercise 9.21
Bluebird Ltd provides credit services. Bluebird Ltd provides its employees with long
service leave entitlements of 13 weeks of paid leave for every 10 years of continuous service.
As the company has been operating for only 5 years, no employees have become entitled to
long service leave. However, the company recognises a provision for long service leave
using the projected unit credit approach required by AASB 119/IAS 19.
The following information is obtained from Bluebird Ltd’s payroll records and actuarial
reports for the non-managerial staff of its debt collection business at 30 June 2022.
Yield on
Unit % expected to Average No. of years goverment
credit No. of become annual until corporate
(years) employees entitled salary vesting bonds
1 100 20 $46 000 9 6%
2 85 26 $48 000 8 6%
3 40 35 $50 000 7 5%
4 32 50 $52 500 6 5%
5 25 65 $55 600 5 5%
 The estimated annual increase in retail wages is 5% p.a. for the next 10 years, reflecting
Bluebird Ltd’s policy of increasing salaries of its debt collection staff for each year of
additional experience.
 At 30 June 2021, the provision for long service leave for non-managerial debt collection
staff was $132 000.
Required
Prepare the journal entry to account for Bluebird Ltd’s provision for long service leave at
30 June 2022 in relation to the non-managerial employees of the company’s debt collection
business. (LO6)
Step 1: Estimate the number of employees who are expected to become eligible for long service
leave.
Years of Eligible
service % expected to become entitled Total employees employees
1 20% 100 20
2 26% 85 22
3 35% 40 14
4 50% 32 16

5 65% 25 16
Step 2: Estimate projected salaries = Current salary x Eligible employees x (1 + inflation rate) n,
with n being the respective period until LSL vests in years.
Years of Eligible Inflation Period until
service employees Current salary rate LSL vests Projected salaries
$ $
1 20 46 000 0.05 9 1 427 222
2 22 48 000 0.05 8 1 560 193
3 14 50 000 0.05 7 984 970
4 16 52 500 0.05 6 1 125 680
5 16 55 600 0.05 5 1 135 380
Step 3: Determine the accumulated benefit.
= Years of service x LSL weeks x projected salaries

Years required for LSL 52
Years of Years of
service Projected service/Years
salaries required for LSL LSL weeks /52 Accumulated benefit
$ $
1 1 427 222 0.1 0.25 35 681
2 1 560 193 0.2 0.25 78 010
3 984 970 0.3 0.25 73 873
4 1 125 680 0.4 0.25 112 568
5 1 135 380 0.5 0.25 141 923
Step 4: Measure the present value of the accumulated benefit.
= Accumulated benefit
(1 + i)n
Years of service Accumulated benefit Discount factor* Present value

$ $
1 35 681 0.591898 21 119
2 78 010 0.627412 48 944
3 73 873 0.710681 52 500
4 112 568 0.746215 84 000
5 141 923 0.783526 111 200
317 763
*The discount factors are calculated based on the respective % yields on HQ corporate bonds as
1 / (1 + yield)n, where n is the respective period until LSL vests in years.
The amount by which the provision for long service should be increased can be calculated as the
present value of the accumulated benefit at 30 June 2022 less the opening balance of the
provision for long service leave because there have been no long service leave payments during
the year: $317 763 - $132 000 = $185 763.


(Increase in provision for long service leave)

Solutions Manual: Financial Reporting

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Solutions Manual: Financial Reporting

Uploaded by

Copyright:

Available Formats

Solutions manual

Loftus, Leo, Daniliuc, Boys, Luke, Ang and

Not for distribution in full. Instructors may post selected solutions

© John Wiley & Sons Australia, Ltd 2020

Chapter 9: Employee benefits

1. What is a paid absence? Provide an example.

In a defined-benefit superannuation plan, the benefits received by members on retirement are

© John Wiley and Sons Australia Ltd, 2020 9.2

© John Wiley and Sons Australia Ltd, 2020 9.3

8. In relation to defined benefit post-employment plans, paragraph 56 of AASB 119/IAS

© John Wiley and Sons Australia Ltd, 2020 9.4

The fundamental qualitative characteristics of financial information prescribed by the Conceptual

© John Wiley and Sons Australia Ltd, 2020 9.5

Case study 9.1

Case study 9.2

Case study 9.3

Long service leave

© John Wiley and Sons Australia Ltd, 2020 9.6

Case study 9.4

© John Wiley and Sons Australia Ltd, 2020 9.7

Accounting for the payroll

7 July Accrued payroll Dr 438 000

15 August Accrued payroll Dr 12 000

15 August Accrued payroll Dr 150 000

Accrual of wages and salaries

30 June Wages and salaries expense Dr 112 000

© John Wiley and Sons Australia Ltd, 2020 9.9

Accounting for the payroll

1 Jan Wages expense Dr 270 000

15 Jan Wages expense Dr 270 000

15 Feb Accrued payroll Dr 337 500

© John Wiley and Sons Australia Ltd, 2020 9.10

Accounting for sick leave

30 June Wages and salaries expense Dr 13 440

© John Wiley and Sons Australia Ltd, 2020 9.11

Accounting for sick leave

© John Wiley and Sons Australia Ltd, 2020 9.12

Accounting for annual leave

AL 1 July 2021 Increase in entitlement AL taken

Employee Wage, Change in AL AL 30/6/22 AL accrual

© John Wiley and Sons Australia Ltd, 2020 9.13

Accounting for profit-sharing arrangements

© John Wiley and Sons Australia Ltd, 2020 9.14

Accounting for the payroll and accrual of wages and salaries

Fortnightly payroll 680 000 800 000

Health fund deductions 7th day of the following month

© John Wiley and Sons Australia Ltd, 2020 9.15

10 August Wages and salaries expense Dr 800 000

11 August Accrued payroll Dr 648 230

1 August Accrued payroll Dr 260 000

21 August Accrued payroll Dr 4 000

24 August Wages and salaries expense Dr 700 000

25 August Accrued payroll Dr 566 270

© John Wiley and Sons Australia Ltd, 2020 9.16

© John Wiley and Sons Australia Ltd, 2020 9.17

Accounting for annual leave

Category Pay/day Op bal Increase AL taken Clos bal. Loading Liability

30/6/2022 Wages and salaries expense Dr 333 700

© John Wiley and Sons Australia Ltd, 2020 9.18

Provision for annual leave Cr 333 700

© John Wiley and Sons Australia Ltd, 2020 9.19

Accounting for annual leave

Category Pay/day Op bal Increase AL taken Clos bal. Loading Liability