ACT204 FINANCIAL ACCOUNTING - ASSIGNMENT HELP ON ACCOUNTING PROBLEMS

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Problem 1: Long Service Leave (All figures are rounded off to the nearest whole number)

Step 1: Salary at T12

Black $ 40,000
White $ 40,000
Brown $ 50,000
Green $ 60,000
Purple $ 70,000

We will assume the growth rate of salary to be equal to the inflation rate given which is 2%

Future Salaries: 

Black $ 48,760
White $ 46,866
Brown $ 56,308
Green $ 64,946
Purple $ 72,828

Step 2: Determine Leave Earned

Black $ 48,760 x 10/52 x 2/12 = $ 1,563
White $ 46,866 x 10/52 x 4/12 = $ 3,004
Brown $ 56,308 x 10/52 x 8/12 = $ 5,414
Green $ 64,946 x 10/52 x 6/12 = $ 8,326
Purple $ 72,828 x 10/52 x 10/12 = $ 11,671

Step 3: PV Leave Earned

Black $ 1563/(1.08)^10 = $ 724 
White $ 3004/(1.07)^8 = $ 1,748 
Brown $ 5414/(1.065)^6 = $ 3,710 
Green $ 8326/(1.06)^4 = $ 6,595 
Purple $ 11671/(1.058)^2 = $ 10,426 

Step 4: Probability that leave will be taken

Black $ 724  x 0.15 = $ 109
White $ 1,748  x 0.20 = $ 350
Brown $ 3,710  x 0.50 = $ 1855
Green $ 6,595  x 0.70 = $ 4616
Purple $ 10,426  x 0.90 = $ 9384

(a) Provision for LSL Balance = $ 16,314

(b) Journal Entry to record Darwin Ltd.’s long-service leave expense, Opening Balance $12,500.

Debit Credit
LSL Expense* 3814
Provision for LSL 3814
* Note: AASB 119.156 requires Dr to go to the expense, unless it can be put towards an asset

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