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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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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