Question

Dainty 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. Required:

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

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

c) 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 PAYG tax is deducted at 30%, what would the entry be to record the employee's weekly salary (round amounts to the nearest dollar)?

Answer 1

Answer:

a) Expected annual sick-leave expense will be:

$200,000 * 2 * 56% = $224,000

$200,000 * 2 * 22% =   $88,000

Total $312,000

.

b)

Particulars	Debit ($)	Credit($)
Sick leave expense A/c	6000
To Provision for sick leave A/		6000

Weekly provision = $312,000/52

Weekly provision = $6,000

.

c)

Particulars	Debit ($)	Credit($)
Provision for sick leave A/c (120*2)	240
Salaries expense A/c (120*3)	360
To PAYG Tax payable A/c (36*2)		72
To Cash A/c		528

Daily wages rate = $600/5

Daily wages rate= $120

Daily PAYG tax = $120 *30%

Daily PAYG tax= $36