Question 3 (15 marks)

Waikato Ltd, a newly established manufacturing company, 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 4 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 summary data is derived from Waikato Ltds payroll records and actuarial reports for the year ended 30 June 2021.

Unit credit (years)	No of employees	% expected to become entitled	Average annual salary	No. of years until vesting	Yield on Treasury bonds
1	140	20	$60,000	9	6%
2	88	25	$65,000	8	6%
3	60	35	$70,000	7	5%
4	40	50	$75,000	6	5%

Additional information:

• The estimated annual increase in general wages is 6% p.a. for the next 10 years, reflecting expected inflation.
• The provision for long service leave for general staff at 30 June 2020 was $180,000.
• No employees were eligible to take long service leave during the year ended 30 June 2021.

Required:

Prepare the journal entries to account for Waikato Ltds provision for long service leave at 30 June 2021. Show all workings and narrations.