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Exam 12: Accounting for Employee Benefits

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Question 31

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When employees finish their time with their employer,it is normal practice to pay them for any annual leave earned but not taken.

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Question 32

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Major Ltd has a weekly payroll of $30 000.Its employees work a 5-day week (Monday to Friday) and are paid on Thursdays in arrears (i.e.for the five days up to,and including,the Thursday) .Pay-as-you-go tax on the weekly payroll is $10 000 and this is paid to the Australian Tax Office on the following Monday.Deductions of $1000 are also made on behalf of employees to pay into a medical benefits fund.The year ended 30 June 2014 falls on a Wednesday.What is the accounting entry to record accrued salaries and wages for this period?

A)
$\begin{array} { | l | l | r | r | } \hline \mathrm { Dr } & \text { Wages and salaries payable } & 15200 & \\\hline \mathrm { Dr } & \text { PAYG tax deduction } & 8000 & \\\hline \mathrm { Dr } & \text { Medical benefits deduction } & 800 & \\\hline \mathrm { Cr } & \text { Wages and salaries } & & 24000 \\\hline\end{array}$
B)
$\begin{array} { | l | l | r | r | } \hline \mathrm { Dr } & \text { Wages and salaries expense } & 24000 & \\\hline \mathrm { Cr } & \text { PAYG tax payable } & & 8000 \\\hline \mathrm { Cr } & \text { Medical benefits fund payable } & & 800 \\\hline \mathrm { Cr } & \text { Wages and salaries payable } & & 15200 \\\hline\end{array}$
C)
$\begin{array} { | l | l | r | r | } \hline \mathrm { Dr } & \text { Wages and salaries expense } & 18000 & \\\hline \mathrm { Cr } & \text { PAYG tax payable } & & 6000 \\\hline \mathrm { Cr } & \text { Medical benefits fund payable } & & 600 \\\hline \mathrm { Cr } & \text { Wages and salaries payable } & & 11400 \\\hline\end{array}$
D)
$\begin{array} { | l | l | r | r | } \hline \mathrm { Dr } & \text { Wages and salaries expense } & 11400 & \\\hline \mathrm { Dr } & \text { PAYG tax deduction } & 6000 & \\\hline \mathrm { Cr } & \text { Medical benefits fund deduction } & 600 & \\\hline \mathrm { Cr } & \text { Wages and salaries payable } & & 18000 \\\hline\end{array}$

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Question 33

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The expense recognised by an employer for a defined benefit superannuation plan:

There are no accounting requirements relating to how superannuation plans should account for the plan's assets,liabilities,expenses and revenues.

An employee whose contract for service includes an entitlement to 1 week's cumulative sick leave per annum will be entitled to how many weeks' sick leave after 3 years' employment if no sick leave has been taken?

Entity A contributes to a defined benefit superannuation plan for its employees.It calculates the following: $\begin{array} { | l | l | } \hline \text { Present value of the obligation } & 12286 \\\hline \text { Fair value of plan assets } & \underline {11500} \\\hline & \underline { 786 } \\\hline\end{array}$ The $786 represents:

Post-employment benefits include:

A defined contribution superannuation plan is one in which:

Any employee benefit that is incurred by the employer during the period and that contributes to the generation of items expected to provide future economic benefits for the employer may be capitalised as an asset.

AASB 119 defines employees as 'natural persons (including a director)appointed or engaged under a contract for services who is subject to the directions of an employer in respect of the manner of execution of those services,whether on a full-time,part-time,permanent,casual or temporary basis'.

To determine whether the employer has any outstanding obligation for superannuation at year end we need to:

Post-employment benefits can include the employee's insurance and medical costs.

Long-service leave must be accrued and recorded as a liability from the first day of employment.

The causes of actuarial gains and losses when accounting for defined benefit superannuation plans includes:

Trailers of the World has a small group of four employees.Trailers take part in a defined contribution plan and pay the required government contribution of 9% plus an additional 4% to reward its employees.Based on the employee earnings below,what is Trailers' superannuation obligation for the year? $\begin{array} { | l | r | } \hline \text { Employee } & \begin{array} { c } \text { Fortnightly } \\\text { salary }\end{array} \\\hline \text { Johnson } & 1200 \\\hline \text { Stevens } & 1800 \\\hline \text { Carey } & 1500 \\\hline \text { Peters } & 2500 \\\hline\end{array}$

Entity A contributes to a defined benefit superannuation plan for its employees.It calculates the following: $\begin{array} { | l | l | } \hline \text { Current service cost } & 12785 \\\hline \text { Interest cost } & 983 \\\hline \text { Expected return on plan assets } & ( 1150 ) \\\hline \text { Net actuarial gain recognised in period } &\underline{( 1835) } \\\hline & \underline{10783} \\\hline\end{array}$ The 'Expected return on plan assets (1150) ' represents:

Dervish Ltd has an average weekly payroll of $800 000.The employees are entitled to 2 weeks',non-vesting sick leave per annum.Past experience suggests that 66% of employees will take the full 2 weeks' sick leave and 15% will take 1 week's leave each year.The rest of the employees take no sick leave.What weekly entry would Dervish make in relation to sick leave?

Midrift Ltd has nine employees who are entitled to long-service leave (LSL) .The LSL can be taken after 12 years of service,at which time the employee is entitled to 15 weeks' leave.After 10 years the employee is entitled to a pro rata cash payment on leaving the company.Information about the employees is set out below. $\begin{array} { | c | r | c | r | } \hline \begin{array} { c } \text { No. of } \\\text { employees }\end{array} & \begin{array} { c } \text { Current salary } \\\text { per employee }\end{array} & \begin{array} { c } \text { Years of } \\\text { service }\end{array} & \begin{array} { c } \text { Probability \% that } \\\text { LSL will be paid }\end{array} \\\hline 3 & 50000 & 6 & 45 \\\hline 3 & 65000 & 8 & 80 \\\hline 3 & 70000 & 11 & 100 \\\hline\end{array}$ Other information collected: $\begin{array} { | c | r | r | } \hline \begin{array} { c } \text { Periods to } \\\text { maturity }\end{array} & \begin{array} { c } \text { Corporate } \\\text { bond rate (\%) }\end{array} & \begin{array} { c } \text { Risk-adjusted discount } \\\text { rate for Midrift Ltd (\%) }\end{array} \\\hline 6 & 8.50 & 9.00 \\\hline 4 & 7.25 & 8.50 \\\hline 2 & 5.75 & 6.75 \\\hline\end{array}$ The inflation rate for the foreseeable future is 1.5%.The future salaries of the employees are expected to keep pace with inflation but not increase as a result of promotion.If the opening balance of the LSL provision is $87 560 what is the entry to record LSL expense for the current period (round amounts to the nearest dollar) ?

When determining accounting entries to be made in relation to the defined benefit liability of an entity,AASB 119 Employee Benefits requires actuarial gains and losses to be recognised as part of the income or expense of the period.

Which of the following is ­not considered compensated absences under AASB 119Employee Benefits?