Question 1

Because of the uncertainties involved in making future predictions,AASB 119 requires:

Accepted Answer

A)  that the long-service leave estimate be based on the level of salary paid to employees at the time the entitlement was earned. 
B)  that there is no consideration given to future inflation rates or promotion prospects of employees. 
C)  that the discount rate used be based on the rates offered by high quality corporate bonds. 
D)  that market-adjusted expected cash flows be discounted at the risk-adjusted rate. 
A)  that the long-service leave estimate be based on the level of salary paid to employees at the time the entitlement was earned. 
B)  that there is no consideration given to future inflation rates or promotion prospects of employees. 
C)  that the discount rate used be based on the rates offered by high quality corporate bonds. 
D)  that market-adjusted expected cash flows be discounted at the risk-adjusted rate.

Question 2

A non-contributory superannuation fund means:

Accepted Answer

A)  No contributions are made to the fund by either the employer or employee. 
B)  Only the employer makes contributions to the fund. 
C)  Only the employee makes contributions to the fund. 
D)  It is a solely government-funded scheme. 
A)  No contributions are made to the fund by either the employer or employee. 
B)  Only the employer makes contributions to the fund. 
C)  Only the employee makes contributions to the fund. 
D)  It is a solely government-funded scheme.

Question 3

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

A) 
$$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Sick leave expense } & 1029000 & \
\hline \mathrm { Cr } & \text { Provision for sick leave } & & 1029000 \
\hline
\end{array}$$ 
B)  No weekly entry is required. 
C) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Sick leave expense } & 567000 & \
\hline \mathrm { Cr } & \text { Sick leave payable } & & 567000 \
\hline
\end{array}$$ 
D) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Sick leave expense } & 19789 & \
\hline \mathrm { Cr } & \text { Provision for sick leave } & & 19789 \
\hline
\end{array}$$ 
A) 
$$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Sick leave expense } & 1029000 & \
\hline \mathrm { Cr } & \text { Provision for sick leave } & & 1029000 \
\hline
\end{array}$$ 
B)  No weekly entry is required. 
C) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Sick leave expense } & 567000 & \
\hline \mathrm { Cr } & \text { Sick leave payable } & & 567000 \
\hline
\end{array}$$ 
D) 
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Sick leave expense } & 19789 & \
\hline \mathrm { Cr } & \text { Provision for sick leave } & & 19789 \
\hline
\end{array}$$

Question 4

A defined contribution scheme:

Accepted Answer

A)  moves any actuarial and investment risk from the employer to the employee. 
B)  requires the contribution made by an employer to be recognised as an expense. 
C)  will only create a liability for the employer to the extent that any agreed contribution remains unpaid at the end of the financial year. 
D)  All of the given answers are correct. 
A)  moves any actuarial and investment risk from the employer to the employee. 
B)  requires the contribution made by an employer to be recognised as an expense. 
C)  will only create a liability for the employer to the extent that any agreed contribution remains unpaid at the end of the financial year. 
D)  All of the given answers are correct.

Question 5

The following journal entry shows:
$$\begin{array} { | l | l | r | r | } 
\hline \mathrm { Dr } & \text { Provision for long-service leave } & 2540 & \
\hline \mathrm { Cr } & \text { Cash } & & 2540 \
\hline
\end{array}$$

Accepted Answer

A)  An (some) employee(s) may have taken long-service leave. 
B)  An (some) employee(s) may have been paid out their long-service leave entitlement upon resignation. 
C)  An employer is building up a provision account for long-service leave to enable it to account for leave taken in the future. 
D)  An (some) employee(s) may have taken long-service leave and an (some) employee(s) may have been paid out their long-service leave entitlement upon resignation. 
A)  An (some) employee(s) may have taken long-service leave. 
B)  An (some) employee(s) may have been paid out their long-service leave entitlement upon resignation. 
C)  An employer is building up a provision account for long-service leave to enable it to account for leave taken in the future. 
D)  An (some) employee(s) may have taken long-service leave and an (some) employee(s) may have been paid out their long-service leave entitlement upon resignation.

Question 6

Whitsunday Ltd provides defined superannuation benefits to two (2)of its employees,which represents an entitlement of three times their final salary on retirement.The following details are relevant to the current superannuation obligation of the company for the two employees for the years ended 30 June 2011 and 2012:
$$\begin{array} { | l | r | r | } 
\hline & 2011 & 2012 \
\hline \text { Fair value of plan assets, end } & \$ 265000 & \$ 290000 \
\hline \text { Expected return on plan assets for the year } & 8 \% & 8 \% \
\hline \text { Present value of superannuation obligation, end of year } & \$ 265000 & \$ 303390 \
\hline \text { Interest rate used to discount the defined benefit obligation } & 7 \% & 7 \% \
\hline \text { Current service cost } & & \$ 15000 \
\hline \text { Contributions to the superannuation plan } & & \$ 10000 \
\hline
\end{array}$$
In accordance with AASB 119 Employee Benefits,what is the expected return and actuarial gain (loss)for the plan assets for the year ending 2012,respectively?

Accepted Answer

A)  $21 200; $6200 
B)  $21 200; ($6200) 
C)  $23 200; $8200 
D)  $23 200; ($8200) 
A)  $21 200; $6200 
B)  $21 200; ($6200) 
C)  $23 200; $8200 
D)  $23 200; ($8200)

Question 7

AASB 119 Employee Benefits prescribes that all obligations relating to wages and salaries,annual leave and sick-leave entitlements,regardless of whether they were expected to be settled within 12 months of the reporting date be measured at nominal (undiscounted)amounts.

Accepted Answer

A) True 
 B)False

Question 8

The general philosophy behind offering shares to employees is that it makes them wealthier.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A)  annual leave and sick leave if they are expected to be settled after 12 months have elapsed from the reporting date. 
B)  cumulative sick leave that has accrued for longer than 12 months. 
C)  wages and salaries. 
D)  none of the given answers 
A)  annual leave and sick leave if they are expected to be settled after 12 months have elapsed from the reporting date. 
B)  cumulative sick leave that has accrued for longer than 12 months. 
C)  wages and salaries. 
D)  none of the given answers

Question 10

Defined benefit plans are fairly simplistic and AASB 119 devotes only a small section to them.

Accepted Answer

A) True 
 B)False

Question 11

Manuka Ltd has seven employees who are entitled to long-service leave (LSL).The LSL can be taken after 15 years of service,at which time the employee is entitled to 13 weeks' leave.After 10 years the employee is entitled to a pro rata cash payment on leaving the company.Information about the employees is set out below. 
$$\begin{array} { | c | r | c | r | } 
\hline \begin{array} { c } 
\text { No. of } \
\text { employees }
\end{array} & \begin{array} { c } 
\text { Current salary } \
\text { per employee }
\end{array} & \begin{array} { c } 
\text { Years of } \
\text { service }
\end{array} & \begin{array} { c } 
\text { Probability \% that } \
\text { LSL will be paid }
\end{array} \
\hline 2 & 60000 & 5 & 35 \
\hline 3 & 40000 & 9 & 95 \
\hline 2 & 70000 & 12 & 100 \
\hline
\end{array}$$ 
Other information collected:
$$\begin{array} { | c | r | r | } 
\hline
\begin{array} { c } 
\text { Periods to } \
\text { maturity }
\end{array} & \begin{array} { c } 
\text { Corporate } \
\text { bond rate (\%) }
\end{array} & \begin{array} { c } 
\text { Risk-adjusted discount } \
\text { rate for Manuka Ltd (\%) }
\end{array} \
\hline 8 & 7.50 & 9.00 \
\hline 5 & 6.25 & 8.00 \
\hline 4 & 6.00 & 7.25 \
\hline 1 & 4.50 & 5.50 \
\hline
\end{array}$$
The inflation rate for the foreseeable future is 2%.The future salaries of the employees are expected to keep pace with inflation but not increase as a result of promotion.Based on the information provided,what should the balance of the long-service leave provision account be (rounded to the nearest dollar)?

Accepted Answer

A)  $47 163 
B)  $47 146 
C)  $47 545 
D)  $20 991 
A)  $47 163 
B)  $47 146 
C)  $47 545 
D)  $20 991

Question 12

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

Accepted Answer

A)  recognise as a liability that part of the entitlement that has accumulated through past service and is expected to be taken if it can be reliably measured. 
B)  expense payments as they are made to a 'wages and salaries' account because the entitlement does not vest with the employee. 
C)  recognise as a liability the accumulated entitlement as at reporting date. 
D)  expense the entitlement as it accumulates over the reporting period as an on-cost. 
A)  recognise as a liability that part of the entitlement that has accumulated through past service and is expected to be taken if it can be reliably measured. 
B)  expense payments as they are made to a 'wages and salaries' account because the entitlement does not vest with the employee. 
C)  recognise as a liability the accumulated entitlement as at reporting date. 
D)  expense the entitlement as it accumulates over the reporting period as an on-cost.

Question 13

Employee benefits include:

Accepted Answer

A)  wages and salaries, sick leave, payroll tax, annual leave. 
B)  superannuation, wages and salaries, sick leave and annual leave. 
C)  sick leave, annual leave, unemployment benefits, salaries and wages. 
D)  annual leave, wages and salaries, post-employment benefits, payroll tax. 
A)  wages and salaries, sick leave, payroll tax, annual leave. 
B)  superannuation, wages and salaries, sick leave and annual leave. 
C)  sick leave, annual leave, unemployment benefits, salaries and wages. 
D)  annual leave, wages and salaries, post-employment benefits, payroll tax.

Question 14

Masters Ltd has three employees who are entitled to long-service leave (LSL).The LSL can be taken after 15 years of service,at which time the employee is entitled to 13 weeks' leave.After 10 years the employee is entitled to a pro rata cash payment on leaving the company.Information about the employees is set out below.
$$\begin{array} { | c | r | c | r | } 
\hline \begin{array} { c } 
\text { No. of } \
\text { employees }
\end{array} & \begin{array} { c } 
\text { Current salary } \
\text { per employee }
\end{array} & \begin{array} { c } 
\text { Years of } \
\text { service }
\end{array} & \begin{array} { c } 
\text { Probability \% that } \
\text { LSL will be paid }
\end{array} \
\hline 1 & 90000 & 4 & 25 \
\hline 1 & 60000 & 7 & 85 \
\hline 1 & 80000 & 11 & 100 \
\hline
\end{array}$$ 
 Other information collected:
$$\begin{array} { | c | r | r | } 
\hline \begin{array} { c } 
\text { Periods to } \
\text { maturity }
\end{array} & \begin{array} { c } 
\text { Corporate } \
\text { bond rate (\%) }
\end{array} & \begin{array} { c } 
\text { Risk-adjusted discount } \
\text { rate for Masters Ltd (\%) }
\end{array} \
\hline 9 & 6.00 & 8.00 \
\hline 6 & 5.25 & 6.50 \
\hline 3 & 4.75 & 5.75 \
\hline 2 & 3.50 & 4.50 \
\hline
\end{array}$$
The inflation rate for the foreseeable future is 3.5%.The future salaries of the employees are expected to keep pace with inflation but not increase as a result of promotion.If the opening balance of the LSL provision is $20 561,what is the LSL expense for the current period (round amounts to the nearest dollar)?

Accepted Answer

A)  $1202 
B)  $948 
C)  $1064 
D)  $21 763 
A)  $1202 
B)  $948 
C)  $1064 
D)  $21 763

Question 15

Mackay Ltd provides defined superannuation benefits to two (2)of its employees,which represents an entitlement of three times their final salary on retirement.The following details are relevant to the current superannuation obligation of the company for the two employees for the years ended 30 June 2011 and 2012:
$$\begin{array} { | l | r | r | } 
\hline & 2011 & 2012 \
\hline \text { Fair value of plan assets, end } & \$ 265000 & \$ 290000 \
\hline \text { Expected return on plan assets for the year } & 6 \% & 8 \% \
\hline \text { Present value of superannuation obligation, end of year } & \$ 265000 & \$ 303390 \
\hline \text { Interest rate used to discount the defined benefit obligation } & 5 \% & 7 \% \
\hline \text { Current service cost } & & \$ 15000 \
\hline \text { Contributions to the superannuation plan } & & \$ 10000 \
\hline
\end{array}$$
In accordance with AASB 119 Employee Benefits,what is the interest cost and actuarial gain (loss)for the defined benefit obligation for the year ending 2012?

Accepted Answer

A)  $13 250; $10 140 
B)  $13 250; ($10 140) 
C)  $18 550; $4840 
D)  $18 550; ($4840) 
A)  $13 250; $10 140 
B)  $13 250; ($10 140) 
C)  $18 550; $4840 
D)  $18 550; ($4840)

Question 16

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

A)  nine weeks 
B)  zero 
C)  ten weeks 
D)  one week 
A)  nine weeks 
B)  zero 
C)  ten weeks 
D)  one week

Question 17

AASB 119 defines 'employee benefits' as:

Accepted Answer

A)  salaries and wages, and associated on-costs. 
B)  all cash payments made to employees. 
C)  all cash payments made to employees in their roles as employees. 
D)  all forms of consideration given up by an entity in exchange for service rendered by employees. 
A)  salaries and wages, and associated on-costs. 
B)  all cash payments made to employees. 
C)  all cash payments made to employees in their roles as employees. 
D)  all forms of consideration given up by an entity in exchange for service rendered by employees.

Question 18

In accounting for a defined benefit superannuation plan,explain how to estimate the 'benefits earned by an employee'.

Accepted Answer

Estimating the benefits earned by an emp

Question 19

AASB 119 has resulted in many more companies recognising liabilities for employee entitlements.There is evidence that this requirement has the effect of:

Accepted Answer

A)  creating cash reserves from which employee entitlements can be paid in the case of company insolvency. 
B)  increasing the probability of companies becoming insolvent. 
C)  reducing the level of employment in Australia. 
D)  None of the given answers are correct. 
A)  creating cash reserves from which employee entitlements can be paid in the case of company insolvency. 
B)  increasing the probability of companies becoming insolvent. 
C)  reducing the level of employment in Australia. 
D)  None of the given answers are correct.

Question 20

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

Accepted Answer

A)  Determine the fair value of any plan. 
B)  Discount any benefit employees have earned. 
C)  Estimate the amount of benefits the employees have earned in return for their service in the current and prior periods. 
D)  Establish the numbers of years until retirement for each employee to accurately calculate their likely benefit. 
A)  Determine the fair value of any plan. 
B)  Discount any benefit employees have earned. 
C)  Estimate the amount of benefits the employees have earned in return for their service in the current and prior periods. 
D)  Establish the numbers of years until retirement for each employee to accurately calculate their likely benefit.

Exam 12: Accounting for Employee Benefits

Because of the uncertainties involved in making future predictions,AASB 119 requires:

A non-contributory superannuation fund means:

A defined contribution scheme:

The following journal entry shows: Provision for long-service leave 2540 Cash 2540

AASB 119 Employee Benefits prescribes that all obligations relating to wages and salaries,annual leave and sick-leave entitlements,regardless of whether they were expected to be settled within 12 months of the reporting date be measured at nominal (undiscounted)amounts.

The general philosophy behind offering shares to employees is that it makes them wealthier.

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

Defined benefit plans are fairly simplistic and AASB 119 devotes only a small section to them.

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

Employee benefits include:

AASB 119 defines 'employee benefits' as:

In accounting for a defined benefit superannuation plan,explain how to estimate the 'benefits earned by an employee'.

AASB 119 has resulted in many more companies recognising liabilities for employee entitlements.There is evidence that this requirement has the effect of:

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

An Overview of the Australian External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financial Reporting

Theories of Accounting

An Overview of Accounting for Assets

Depreciation of Property, plant and Equipment

Revaluations and Impairment Testing of Non-Current Assets

Inventory

Accounting for Intangibles

Accounting for Heritage Assets and Biological Assets

An Overview of Accounting for Liabilities

Accounting for Leases

Share Capital and Reserves

Accounting for Financial Instruments

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in Equity

Accounting for Share-Based Payments

Accounting for Income Taxes

The Statement of Cash Flows

Accounting for the Extractive Industries

Accounting for General Insurance Contracts

Accounting for Superannuation Plans

Events Occurring After the End of the Reporting Period

Segment Reporting

Related Party Disclosures

Earnings Per Share

Accounting for Group Structures

Further Consolidation Issues I: Accounting for Intragroup Transactions

Further Consolidation Issues II: Accounting for Non-Controlling Interests

Further Consolidation Issues IV: Accounting for Changes in the Degree of Ownership of a Subsidiary

Accounting for Equity Investments,including Investments in Associates and Joint Arrangements

Accounting for Foreign Currency Transactions

Translating the Financial Statements of Foreign Operations

Accounting for Corporate Social Responsibility

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