Question 1

Short-term employee benefits are defined in AASB 119 as:

Accepted Answer

Short-term employee benefits are defined as employee benefits that are wholly due within 12 months after the end of the period in which the employee rendered the related service. This includes items such as salaries, wages, social security contributions, bonuses, and annual leave. Therefore, option D is the best choice.

Question 2

Kerry Gill works for Kentucky Enterprises for an annual salary of $60 000.Kerry is entitled to 4 weeks' annual leave per year with a leave loading of 17.5%.What entry each week,additional to the one recording wages expense and PAYG tax deduction,would be required to accrue Kerry's entitlement to annual leave? When Kerry takes his 4 weeks' annual leave,what entry would be made to record this (only)?
The tax is calculated at 30%.(Assume that there are 52 weeks in a year and round to the nearest dollar.)

Accepted Answer

The answer of Kerry Gill works for Kentucky Enterprises for...

Question 3

For a defined benefit plan,if the fair value of the plan's assets match the expected payout to employees no further liabilities would exist.

Accepted Answer

This statement is true. If the fair value of the plan's assets match the expected payout to employees, it means that the plan has enough assets to cover its liabilities and there are no further liabilities. However, if the fair value of the plan's assets is less than the expected payout to employees, the plan would have an underfunded status and additional liabilities would exist.

Question 4

The appropriate accounting treatment for accumulating non-vesting sick leave is to:

Accepted Answer

Non-vesting sick leave is a liability for the company, and it should be recognized in the financial statements if it can be reliably measured. The appropriate accounting treatment is to recognize as a liability that part of the entitlement that has accumulated through past service and is expected to be taken. This ensures that the liability is accurately reflected in the financial statements and that future cash outflows are properly accounted for.

Question 5

A defined contribution superannuation plan is one in which:

Accepted Answer

In a defined contribution superannuation plan, the benefits paid out by the plan depend on the contributions made to the plan and the earnings of that plan. This means that the final value of the plan is not guaranteed and may fluctuate based on investment returns. Participants in the plan are responsible for managing their own investments and assume the investment risk.

Question 6

Minor Ltd has a weekly payroll of $30 000.Its employees work a 5-day week (Monday to Friday)and are paid on Thursdays in arrears (i.e.for the five days up to,and including,the Thursday).Pay-as-you-go tax on the weekly payroll is $10 000 and this is paid to the Australian Tax Office on the following Monday.Deductions of $1000 are also made on behalf of employees to pay into a medical benefits fund,which is also paid on the following Monday each week.The year ended 30 June 2014 falls on a Wednesday.Assuming that no reversing entry has been made since the year end,what is the entry to record the payment of the wages and salaries and the tax and medical benefits on the appropriate days immediately after the year end?

Accepted Answer

The answer of Minor Ltd has a weekly payroll of...

Question 7

Which of the following is not a step in accounting for contributions to a defined benefit superannuation plan?

Accepted Answer

Accounting for contributions to a defined benefit superannuation plan involves determining the fair value of the plan, discounting any earned benefits, and estimating the amount of benefits earned in the current and prior periods. However, establishing the numbers of years until retirement for each employee is not necessary as the benefit calculations are typically driven by a formula based on service and compensation.

Question 8

An employee whose contract for service includes an entitlement to 2 weeks' non-cumulative,vesting sick leave tenders his/her resignation to take effect exactly halfway through their fifth year of employment.What is the employee's sick leave entitlement,in weeks,that will be paid out on his/her departure assuming that no sick leave has been used?

Accepted Answer

The answer of An employee whose contract for service includes...

Question 9

What discount rate does AASB 119 require to be used to discount estimated future cash outflows associated with the relevant employee entitlements?

Accepted Answer

AASB 119 requires the use of the interest rate on high quality corporate bonds with terms to maturity that match the terms of the related liabilities to discount estimated future cash outflows associated with the relevant employee entitlements. This is because this rate reflects the time value of money and the risks inherent in the liabilities. It is also an objective rate that is widely available and can be consistently applied across entities.

Question 10

A defined contribution scheme:

Accepted Answer

All of the given answers are correct. A defined contribution scheme shifts the actuarial and investment risk from the employer to the employee, and the employer's contribution is recognised as an expense. Additionally, the employer's liability only extends to any unpaid contributions at the end of the year.

Question 11

Danish Ltd has an average weekly payroll of $200 000.The employees are entitled to 2 weeks',non-vesting sick leave per annum.Past experience suggests that 56% of employees will take the full 2 weeks' sick leave and 22% will take 1 week's leave each year.The rest of the employees take no sick leave.In the current week an employee with a weekly salary of $600 has been off sick for the first time this year.The employee took 2 days off out of her normal 5-day working week.Assuming that a weekly entry has been made to record the accumulated liability for sick leave and that PAYG tax is deducted at 30%,what would the entry be to record the employee's weekly salary (round amounts to the nearest dollar)?

Accepted Answer

The employee's weekly salary is $600, and they took 2 days off, which is 40% of their 5-day working week. Therefore, the sick leave expense is 40% of $600 = $240. The remaining salary is $360. PAYG tax at 30% on $600 is $180. The correct entry debits the provision for sick leave for the sick leave expense ($240), debits salaries and wages for the remaining salary ($360), credits PAYG tax payable for the tax on the full salary ($180), and credits cash for the net pay after tax deduction ($420).

Question 12

'On-costs' can be described as:

Accepted Answer

On-costs refer to the additional costs beyond the salary or wages that an employer incurs. These include costs such as payroll tax, workers' compensation insurance, and other benefits like superannuation, leave entitlements, and training costs. These costs are not directly received by the employee, but they add to the total cost of employing staff for the company.

Question 13

Sick leave may be classified as:

Accepted Answer

Sick leave can be classified in various ways, including cumulative vesting (where unused sick leave accumulates over time and may provide benefits upon leaving the job), cumulative non-vesting (where it accumulates but does not provide benefits upon leaving), and non-cumulative vesting (where it does not accumulate but may offer some form of benefit upon leaving). Therefore, all the given answers are correct classifications of sick leave.

Question 14

The amount represented as a current liability,'Provision for long-service leave' generally represents:

Accepted Answer

The 'Provision for long-service leave' represents an estimate of the amount of long-service leave that is expected to be taken by employees in the 12 months following the balance date, which the company needs to account for as a current liability.

Question 15

According to the former Australian guidance section of AASB 119 what are the categories of long-service leave entitlements and how should they be accounted for?

Accepted Answer

The answer of According to the former Australian guidance section...

Question 16

An employee whose contract for service includes an entitlement to 1 week's cumulative sick leave per annum will be entitled to how many weeks' sick leave after 3 years' employment if no sick leave has been taken?

Accepted Answer

The employee has accrued 1 week's sick leave entitlement for each year of service, therefore after 3 years of employment, the employee would have accrued 3 weeks' sick leave entitlement. This is not affected by annual leave entitlements or long-service leave entitlements.

Question 17

Employee benefits include:

Accepted Answer

Employee benefits typically include superannuation (or retirement savings plans), wages and salaries, sick leave, and annual leave. While some countries may offer unemployment benefits, they are not generally considered an employee benefit. Post-employment benefits, such as pensions, fall under a separate category of employee compensation. Payroll tax is an expense borne by the employer and not a benefit provided to the employee.

Question 18

AASB 119 requires which items to be recorded at their discounted amounts?

Accepted Answer

The answer of AASB 119 requires which items to be...

Question 19

Dervish Ltd has an average weekly payroll of $700 000.The employees are entitled to 2 weeks',non-vesting sick leave per annum.Past experience suggests that 66% of employees will take the full 2 weeks' sick leave and 15% will take 1 week's leave each year.The rest of the employees take no sick leave.What weekly entry would Dervish make in relation to sick leave?

Accepted Answer

To calculate the weekly sick leave expense, first determine the total annual sick leave expense based on the usage patterns and then divide by the number of weeks in a year. For 66% of employees taking 2 weeks and 15% taking 1 week, with a weekly payroll of $700,000: $0.66 \times 2 + 0.15 \times 1 = 1.47$ weeks per employee on average. The annual sick leave cost is $1.47 \times 700,000 = 1,029,000$. Dividing by 52 weeks gives a weekly expense of approximately $19,789, which matches option D.

Question 20

Major Ltd has a weekly payroll of $30 000.Its employees work a 5-day week (Monday to Friday)and are paid on Thursdays in arrears (i.e.for the five days up to,and including,the Thursday).Pay-as-you-go tax on the weekly payroll is $10 000 and this is paid to the Australian Tax Office on the following Monday.Deductions of $1000 are also made on behalf of employees to pay into a medical benefits fund.The year ended 30 June 2014 falls on a Wednesday.What is the accounting entry to record accrued salaries and wages for this period?

Accepted Answer

The year ended on a Wednesday, meaning employees worked for three days of the week (Monday to Wednesday) before the year-end. The weekly payroll is $30,000, so for three days, it's $18,000 (3/5 of $30,000). The PAYG tax is $10,000 weekly, so for three days, it's $6,000 (3/5 of $10,000). The medical benefits deduction is $1,000 weekly, so for three days, it's $600 (3/5 of $1,000). The correct entry records the expense of $18,000 and allocates the deductions and payable amounts accordingly, which matches option B.

Quiz 12: Accounting for Employee Benefits