Chopin (Pty) Ltd ordinarily pays their employees a bonus in the form of a thirteenth cheque together with their December pay. This has created a constructive obligation on their part to recognise the liability. Chopin (Pty) Ltd only pays the bonus if the employee is still working for the company on 31 December of each year. Any employees joining the company during the year are paid a pro‐rata (proportional) amount of their bonus. On 1 January 2020 there were 32 employees in total earning an average monthly salary of R21 300 each. During the year, two new employees were taken on, one on 1 May 2020 at a salary of R15 700 per month, and the other on 1 November 2020 earning R10 500 per month. Two of the original employees resigned on 31 May 2020, their last day of employment being on 30 June 2020. Required: Q.2.1.1 Calculate the value of the provision that Chopin (Pty) Ltd should recognise on 1 January 2020. Prepare the journal entry. No narration is necessary. Q.2.1.2 What will the carrying value of the liability be on 30 June 2020? Show your calculations and prepare the journal entry to recognise the adjustment from the 1 January balance. No narration is necessary. Show all your workings. Round all amounts to the nearest Rand.
Chopin (Pty) Ltd ordinarily pays their employees a bonus in the form of a thirteenth cheque
together with their December pay. This has created a constructive obligation on their part to
recognise the liability. Chopin (Pty) Ltd only pays the bonus if the employee is still working for the
company on 31 December of each year. Any employees joining the company during the year are
paid a pro‐rata (proportional) amount of their bonus.
On 1 January 2020 there were 32 employees in total earning an average monthly salary of
R21 300 each. During the year, two new employees were taken on, one on 1 May 2020 at a salary
of R15 700 per month, and the other on 1 November 2020 earning R10 500 per month. Two of the
original employees resigned on 31 May 2020, their last day of employment being on 30 June 2020.
Required:
Q.2.1.1 Calculate the value of the provision that Chopin (Pty) Ltd should recognise on 1 January 2020. Prepare the
Q.2.1.2 What will the carrying value of the liability be on 30 June 2020? Show your calculations and prepare the journal entry to recognise the adjustment from the
1 January balance. No narration is necessary.
Show all your workings.
Round all amounts to the nearest Rand.
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