Question

Question 2                                                                                                          

Jonny Ltd has an average weekly payroll of $800,000. 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.

1. What weekly entry would Jonny Ltd make in relation to sick leave? (Round amounts to the nearest dollar)

Answer 1

ANSWER:-(a)The Jonny Ltd's weekly entry to make in relation to sick leave are defined as follows:-

A)

Dr	Sick leave expense	1056,000
cr	Provision for sick leave		1056,000

B)NO Weekly entry is required.

C)

Dr.	Sick leave expense	22615
Cr.	Provision for sick leave		22615

EXPLANATION:The expected annual sick leave expense for Jonny Ltd on the basis of average salaries would be as follows:-

$800,000x2x0.66 = $1056,000

$800,000 x 1 x 0.15 = $120,000

ADD = $1176,000

$1176,000 over 52 weeks = 22615 ( here,$1176,000/52 = 22615)

This would equate to $22615 per week.On the basis ,Jonny Ltd could pass the following journay entry each week:-

Dr.	Sick leave expense	22615
Cr.	Provision for sick leave		22615