1. On 1 January 2020, H Ltd acquired inventories for cash consideration of US$600,000. The inventories are still on hand at 30 June 2020 and have a net realizable value of US$620,000. Relevant exchange rates are as follows:

1 January 2020	NZ$1	=	US$0.67
30 June 2020	NZ$1	=	US$0.72

Required

Give journal entries in the books of H Ltd on 1 January and 30 June 2020. Show the calculations. (5 marks)

2. S Ltd provides 5 days of sick leave to its employees. Throughout 20X1 the company had 100 employees. The leave is accumulating and vesting. The employees took a total of 450 days of sick leave, out of which 50 days relate to the unused sick leave of 20X0, during the year ended 31 December 20X1. The wage is $160 per day. The beginning balance of sick leave provision was $11,200.

Required

1. How much sick leave expense S Ltd should report in the income statement for the year ended 31 December 20X1? Show the calculations.

How much sick leave provision, if any, the company should report in the statement of financial position as at 31 December 20X1?

2. Provide a brief explanation for the calculation you made in (a.) and (b.) above 

3. At the beginning of the year 20X1, C Ltd grants stock options to each of its 50 employees in the sales department. The stock options will vest at the end of year 20X3, provided the employees remain in the employ of the company, and provided that sales increase by at least an average of 5% per year. If sales increase by an average of between 5% and 10% per year, each employee will receive 100 stock options. If sales increase by an average of between 10% and 15% per year, each employee will receive 150 stock options. If sales increase by an average of more than 15% per years, each employee shall receive 200 stock options. On the grant date, the company estimates that the fair value of each option is $3 per option.

By the end of 20X1, two employees left, and the company estimates that another three employees will leave by the end of 20X3. Sales increased by 11% during 20X1, and the company estimates that the current rate of sales increase during 20X2 and 20X3.

By the end of 20X2, another one employee left, and the company estimates that one more employee will leave in 20X3. Sales increased by 6% in 20X2. The company estimates that sales will increase by 7% during 20X3.

None left the company in 20X3. Sales increased by 5% during 20X3.

Required

1. Prepare a schedule setting out the annual and cumulative remuneration expense for years 20X1-20X3.

2. Give the journal entry to recognize the employee stock option expense in year 1.

3. Briefly explain why the change in the estimated number of stock options in year 20X2 is not accounted for as an adjustment to the amount recognized in the 20X1.

Answer rating: 100% (QA)

Journal entries for H Ltd 1 January 2020 Inventory Dr 600000 Cash Cr 600000 Explanation This entry records the acquisition of inventories for cash con... View the full answer