Question

Asia Pacific Ltd started operating on 1 July 2017 with 12 employees. Three years later all of those employees were still with the company. On 1 July 2019 the company hired 15 more people but by 30 June 2020 only 10 of those employed at the beginning of that year were still employed by Asia Pacific Ltd.

All employees are entitled to 13 weeks’ long-service leave after a conditional period of 10 years of employment with Asia Pacific Ltd.

At 30 June 2020 Asia Pacific Ltd estimates the following:

•  The aggregate annual salaries of all employees hired on 1 July 2017 is now $1,200,000.

•  The aggregate annual salaries of all current employees hired on 1 July 2019 is now $800,000.

•  The probability that employees hired on 1 July 2017 will continue to be employed for the duration

  of the conditional period is 40 per cent.

•  The probability that employees hired on 1 July 2019 will continue to be employed for the duration

  of the conditional period is 20 per cent.

•  Salaries are expected to increase indefinitely at 1 per cent per annum.

  The interest rates on high-quality corporate bonds are as follows:

  Corporate bonds maturing in seven years 6% Corporate bonds maturing in eight years 8% Corporate bonds maturing in nine years 8% Corporate bonds maturing in ten years 10%

  At 30 June 2019 the provision for long-service leave was $12,000.

  Required:

1. a) Calculate the total accumulated long-service leave benefit as at 30 June 2020.

Answer 1