QUESTION 3: Accounting for Long Service Leave (11 Marks)

The employees of a New South Wales company are entitled to 9 weeks' long service leave after 10 years' continuous service. The following information has been compiled for calculating the liability for long-service leave as at 30 June 2020.

Years of service @ 30 June 2020

Number of employees @ 30 June 2020

Aggregate annual salaries for 2019/2020$

Aggregate projected annual salaries when leave is due$

Probability of becoming unconditionally entitled to LSL

2

15

1,155,000

2,310,000

0.20

7

80

12,400,000

18,600,000

0.65

9

30

6,150000

6,273,000

0.95

The long-service leave liability reported for the year-ended 30 June 2019 was $1,800,000. The following government bond rates have been identified.

Period to Maturity (years)

Government Bond rate (%)

1

1.0

3

2.0

8

6.0

REQUIRED:

a)Calculate the Long service liability as 30 June 2020.(9 marks)

[Answer and show workings here]

b)Prepare the general journal entry in the books of the company for the year ended 30 June 2020 to provide for long-service leave for its employees in accordance with the requirements of AASB 119.(2 marks)