Question
The employees of XYZ Ltd are entitled to 10 weeks' long-service leave (LSL) after 10 years of continuous service with the company. The pre-conditional period
The employees of XYZ Ltd are entitled to 10 weeks' long-service leave (LSL) after 10 years of continuous service with the company. The pre-conditional period is 5 years. The following information has been compiled for calculating the liability for long service leave as at 30 June 2021.
| Number of employees as at 30 June 2021 | Aggregate projected salary when LSL vests | Aggregate annual salaries for 2020-2021 | Years of service as at 30 June 2021 | The expected Government bond rate at the time when LSL vests | Probability that LSL will vest |
| 22 | $950,000 | $560,000 | 4 | 7% | 24% |
| 28 | $350,000 | $250,000 | 6 | 4% | 73% |
| 24 | $190,000 | $180,000 | 9 | 3% | 100% |
The total long service leave provision reported in the balance sheet as at 30 June 2020 was $59,982.
Assume that no LSL was taken during the year.
Required:
Based on the information provided above calculate the LSL Entitlement that needs to be booked as at 30 June 2021.
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Financial management theory and practice
Authors: Eugene F. Brigham and Michael C. Ehrhardt
12th Edition
978-0030243998, 30243998, 324422695, 978-0324422696
