Treloar Ltd has 10 employees, who are each paid $750 per week for a 5 day working week. Each employee is entitled to 8 days accumulating non-vesting sick leave per year. At 1 July 2022 the accumulated untaken leave was 16 days in total. During the year ended 30 June 2023 a total of 50 days sick leave was taken, of which 8 days were unpaid leave.
Of the accumulated untaken leave at 30 June 2023 it is estimated that 75% of it will be taken during the following year.
The balance of the provision for sick leave at 30 June 2023 is:

Question

Quizplus · Accepted Answer

The provision for sick leave is calculated as follows: 
- 10 employees x $750 per week x 8 days per employee per year = $60,000 per annum
- The accumulated untaken leave at 1 July 2022 is 16 days or 2 weeks, which is worth $15,000 ($30,000 per annum)
- During the year ended 30 June 2023, a total of 50 days sick leave was taken, of which 8 days were unpaid leave. This means that the company paid for 42 days of sick leave, worth $31,500 ($750 per employee per day x 42 days)
- At 30 June 2023, the accumulated untaken leave is estimated to be 4 weeks (or 20 days) in total, of which 75% will be taken in the following year. This means that the provision for the following year is $22,500 ($30,000 per annum x 75%)

Therefore, the balance of the provision for sick leave at 30 June 2023 is:
$30,000 (provision at 1 July 2022) + $31,500 (sick leave taken during the year) - $22,500 (estimated provision for the following year) = $6,000
However, the question asks for the balance of the provision, not the provision itself, so we need to adjust for the fact that some sick leave has been taken: 
$6,000 (total provision) - $6,075 (sick leave taken but not yet provided for) = -$75, which should be rounded up to $0. Therefore, the correct answer is C) $6,075.

Treloar Ltd Has 10 Employees, Who Are Each Paid $750