Question
XYZ Ltd has two employees who are entitled to long service leave (LSL). The LSL can be taken after 15 years of service, at which
XYZ Ltd has two employees who are entitled to long service leave (LSL). The LSL can be taken after 15 years of service, at which time each employee is entitled to 13 weeks leave. Information about the employees is set out below:
Employee | Current annual salary | Years of service | Probability that LSL will be paid |
Richard | $90,000 | 10 | 33% |
Kevin | $80,000 | 12 | 83% |
Other information collected:
Periods to maturity | Government bond rate |
5 years | 6% |
3 years | 5% |
- There is no deep corporate bond rate for this company
- The annual inflation rate for the foreseeable future is: 3%
- The future salaries of the employees are expected to keep pace with inflation but not increase as a result of promotion.
- The opening balance of the LSL provision is: $12,000
What is the closing balance of the provision for long service leave account at the end of the current financial year? If your answer does not appear here, choose alternative closest to your answer.
Select one:
a. $38,370
b. $22,101
c. $30,478
d. $16,824
e. $47,938
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