Hood Ltd provides its employees with 13 weeks long-service leave for 10 years of service. Assume there is no entitlement until 10 years of service is reached. At reporting date, Hood Ltd has 10 employees who have been with the company for 6 years and each employee earns $100 000 per annum. Hood Ltd calculates that there is an 80% probability that each employee will maintain their employment with the Company until their long-service leave entitlement vests. The projected inflation rate is 3% p.a. and it is expected that wage increases will keep pace with inflation. The corporate bond rate for an issue with 4 years to maturity is 6% while for an issue with 6 years to maturity the rate is 8%.

Years

FV of $1 @

FV of $1 @

PV of $1

PV of $1

3%

6%

6%

8%

4

1.1254

1.2625

0.7921

0.7350

6

1.1940

1.4184

0.7050

0.6302

Calculate the provision for long service leave at reporting date of Hood Ltd. What is journal entry if the trial balance currently shows the provision at an amount of $60 000?