QUESTION 1:

When an organisation recognises a provision and related expense for annual leave, and a provision for long-service leave for its employees, the risk to employees that they will not be paid these amounts that have been provided is effectively zero. Is this true or false? Why?

QUESTION 2:

Bear Island Ltd has a weekly payroll of $300 000. The employees receive entitlements to two weeks' sick leave per year. The sick-leave entitlements are classified as non-vesting. Past experience, and experience within the industry, suggest that 60 per cent of employees will use their full two weeks' entitlement each year; 20 per cent of employees will take one week's sick leave each year; and 10 per cent of employees will take one day's sick leave each year.

REQUIRED

a)Calculate the expected annual sick-leave expense for Bear Island Ltd (on the basis of average salaries).

b)Provide the journal entries necessary to recognise the sick-leave entitlement expense as it accrues.

c)Explain how your answer to part (a) and (b) above would change if:

i.The sick leave was vesting;

ii.The sick leave was non-cumulating and non-vesting.