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Magpie Ltd has 80 employees who each earns a gross wage of $120 per day. In an attempt to reduce absenteeism, Magpie Ltd introduced a new workplace agreement providing all employees with entitlement to 5 days of non-vesting, accumulating sick leave per annum, effective from 1 July 2019. Under the previous workplace agreement, all sick leave was non-cumulative. During the year ended 30 June 2020, 240 days of paid sick leave were taken by employees. It is estimated that 70% of unused sick leave will be taken during the year ended 30 June 2021 and that 30% will not be taken at all. Required: Calculate the sick leave provision as at 30 June 2020 and the sick leave expense for the year ended 30 June 2020. Prepare a journal entry to recognise the sick leave expense and the associated provision. How much would have been the sick leave provision as at 30 June 2020 if the sick leave had been vesting. Provide a brief explanation for your answer

Magpie Ltd has 80 employees who each earns a gross wage of $120 per day. In an attempt to reduce absenteeism, Magpie Ltd introduced a new workplace agreement providing all employees with entitlement to 5 days of non-vesting, accumulating sick leave per annum, effective from 1 July 2019. Under the previous workplace agreement, all sick leave was non-cumulative. During the year ended 30 June 2020, 240 days of paid sick leave were taken by employees. It is estimated that 70% of unused sick leave will be taken during the year ended 30 June 2021 and that 30% will not be taken at all. Required: Calculate the sick leave provision as at 30 June 2020 and the sick leave expense for the year ended 30 June 2020. Prepare a journal entry to recognise the sick leave expense and the associated provision. How much would have been the sick leave provision as at 30 June 2020 if the sick leave had been vesting. Provide a brief explanation for your answer

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter9: Current Liabilities And Contingent Obligations
Section: Chapter Questions
Problem 6MC
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A. Magpie Ltd has 80 employees who each earns a gross wage of $120 per day. In an attempt to reduce absenteeism, Magpie Ltd introduced a new workplace agreement providing all employees with entitlement to 5 days of non-vesting, accumulating sick leave per annum, effective from 1 July 2019. Under the previous workplace agreement, all sick leave was non-cumulative. During the year ended 30 June 2020, 240 days of paid sick leave were taken by employees. It is estimated that 70% of unused sick leave will be taken during the year ended 30 June 2021 and that 30% will not be taken at all. Required: a. Calculate the sick leave provision as at 30 June 2020 and the sick leave expense for the year ended 30 June 2020. o. Prepare a journal entry to recognise the sick leave expense and the associated provision. c. How much would have been the sick leave provision as at 30 June 2020 if the sick leave had been vesting. Provide a brief explanation for your answer
Transcribed Image Text:A. Magpie Ltd has 80 employees who each earns a gross wage of $120 per day. In an attempt to reduce absenteeism, Magpie Ltd introduced a new workplace agreement providing all employees with entitlement to 5 days of non-vesting, accumulating sick leave per annum, effective from 1 July 2019. Under the previous workplace agreement, all sick leave was non-cumulative. During the year ended 30 June 2020, 240 days of paid sick leave were taken by employees. It is estimated that 70% of unused sick leave will be taken during the year ended 30 June 2021 and that 30% will not be taken at all. Required: a. Calculate the sick leave provision as at 30 June 2020 and the sick leave expense for the year ended 30 June 2020. o. Prepare a journal entry to recognise the sick leave expense and the associated provision. c. How much would have been the sick leave provision as at 30 June 2020 if the sick leave had been vesting. Provide a brief explanation for your answer
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