Question
Answer for c): Bear Island Ltd has a weekly payroll of $300 000. The employees receive entitlements to two weeks' sick leave per year. The
Answer for c):
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.
a) Calculate the expected annual sick-leave expense for Bear Island Ltd (on the basis of average salaries).
$300,000 x 2 x 0.6 = $360,000
$300,000 x 1 x 0.2 = $60,000
$300,000 x 1/5 x 0.1 = $6,000
$426,000
b )Provide the journal entries necessary to recognise the sick-leave entitlement expense as it accrues.
$426,000/52 = $8192 week
Dr Sick leave expense8192
CrProvision for sick leave8192
(c)Explain how your answer to part (a) and (b) above would change if:
i.The sick leave was vesting;
ii.The sick leave was non-accumulating and non-vesting.
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