Accounting Theory and Current Issue

ACCOUNTING THEORY AND
CURRENT ISSUE

TABLE OF CONTENTS
WEEK 6...........................................................................................................................................3
a) .................................................................................................................................................3
b) .................................................................................................................................................3
c)..................................................................................................................................................4
d)..................................................................................................................................................4
WEEK 7...........................................................................................................................................4
a) .................................................................................................................................................4
b) ................................................................................................................................................5
c)..................................................................................................................................................5
WEEK 8...........................................................................................................................................6
a)..................................................................................................................................................6
WEEK 9...........................................................................................................................................7
a) .................................................................................................................................................7
b)..................................................................................................................................................8
WEEK 10.........................................................................................................................................9
a)..................................................................................................................................................9
b)..................................................................................................................................................9
REFERENCES..............................................................................................................................11

WEEK 6
a)
Total accumulated long service leave benefit as on June 30, 2020.
Current
salary
Number of
employees Total salary
Inflation
rate
Years to
maturity
Projected
salary Entitlement
1200000 12 14400000 1.00% 7 15438749 1157906
800000 10 8000000 1.00% 9 8749482 218737
Accumulated total long service leave benefit on June, 2020.
Years to
maturity' Entitlement Corporate bond
Present
value Probability LSV benefit
7 1157906 0.06 770074 0.4 308029
9 218737 0.08 109423 0.2 21885
Total 329914
Total accumulated long service leave benefits is 329,194.
Notes :
 Total salary is calculated by multiplying current salary with number of employees.
 Projected salary = Total salary / (1 + Inflation rate)^years to maturity
 Entitlement amount = Projected salary * 13 weeks/ 52 weeks *years of service/ Years of
conditional period
 Calculation of present value of entitlement = Amount of entitlement / (1+rate of
corporate bond)^ years to maturity.
 Bond rate is selected by number of years left tile maturity. Therefore for service life with
3 years to 6% and for 1 year is 8%
 Calculating amount of LSV by multiplying present value with probability.
b)
Amount to be reported for long service leave provision on June 30, 2020 in accordance with
AASB 119.
The amount which is required to be reported under AASB 119 is present value of future
costs that is it will have to report the long service leave of 329,194 as the obligation under the
financial statements of company.

c)
Journal entry
As company had opening provision of 12000 for same it will be making provision of 317,194
for year.
Journal entry for the provision
Long Service leave expense 317194
To Provision for long service leave 317194
d)
Employee benefits that are required to be discounted as per AASB 119
AASB 119 of employee benefits requires rate to be used of not for pro t entities of private
sector and for pro t entities of private sector for discounting the long term benefits of employees.
It is determined with reference to the market yield at end of period over corporate bonds. AASB
119 where deep market is not there it requires market yield on the government bonds should be
used for discounted the liabilities (AASB 119, 2019). As per the standard companies are required
to measure the obligation of future employee benefits on the current period. It is essential for the
company to record the future values by bringing them at present scale using the discount rate of
the corporate bonds applicable.
WEEK 7
a)
Computation of gross profit to be recognised every year when outcome could be reliably
estimated
Year Particulars Amount
2019 2000000*31.25% 625000
2020 2000000*81.25% 1625000
- Profit already recorded -625000
Profit for the year 1000000
2021 2000000*100% 2000000
- Profit already recorded -1625000
Profit for the year 375000
Calculation of % of completion
2019 2020 2021
Billings & collection 2000000 5000000 3000000