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). (2 marks

Answer 1

Answer:

Explanation:

Weekly payout per employee = $200000

per employee cost of leave per annum .

200000 ( 2 x .56 + 1 x .22 )

= 200000 ( 1.12 + .22 )

= 2,68,000 .

Answer 2

Answer:

Explanation:

Solution

a)  

The expected annual sick leave expenses for Dainty Ltd (on the basis of average salaries) would be:

$200 000 x 2 x 0.56   = $224 000

$200 000 x 1 x 0.22  = $44 000

Remaining 22% will take no leave

    = $268 000

b)  

This would equate to $5154 per week. On this basis, Dainty Ltd could post the following journal entry each week:

Dr      Sick leave expense  $5154

Cr      Sick leave payable    $5154

         ($268 000/52 = $5154)