QUESTION 1:

a) What is an 'employee benefit' and what are the various forms that these benefits can take?

b) When would it be considered that income has arisen in relation to employee benefits?

QUESTION 2:

What is long-service leave and what is meant by: a preconditional period; a conditional period; and an unconditional period?

QUESTION 3:

Jerry Lopez works for Lightning Bolt Ltd. His annual salary is $100 000 and he is paid weekly. As part of his employment agreement, he is entitled to four weeks' annual leave each year. He receives a leave loading of 17.5 per cent.

REQUIRED

a) Provide the weekly journal entries to record the recognition of Jerry Lopez's annual leave entitlements.

b) Provide the appropriate journal entries, assuming that Jerry Lopez takes two weeks' annual leave after being employed for one year and assuming that the tax deducted from the payment for the two weeks is $1200.

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.