Answered Essay: Concord Corporation offers enriched parental benefits to its staff. While the government p

Concord Corporation offers enriched parental benefits to its staff. While the government provides compensation based on Employment Insurance legislation for a period of 12 months, Concord increases the amounts received and extends the period of compensation. The benefit program tops up the amount received to 100% of the employee’s salary for the first 12 months, and pays the employee 75% of his or her full salary for another 6 months after the Employment Insurance payments have ceased.

Zeinab Jolan, who earns $53,700 per year, announced to her manager in early June 2017 that she was expecting a baby in mid-November. On October 29, 2017, 9 weeks before the end of the calendar year and Concord’s fiscal year, Zeinab applied for and began her 18-month maternity leave. Assume that the Employment Insurance program pays her a maximum of $720 per week for 52 weeks.

For the purpose of this question, ignore any tax, CPP, and EI deductions when making payments to Zeinab.

1. Prepare all entries that Concord Corporation must make during its 2017 fiscal year related to the maternity benefits plan in regard to Zeinab Jolan
A) to record employee benefit expense
​B) to record payment of parental leave benefits for one week

2. Prepare one entry to summarize all entries that the company will make in 2018 relative to Zeinab Jolan’s leave

3. Calculate the amount of maternity benefits payable at December 31, 2017, and 2018.

Expert Answer

 

1
Particulars Debit Credit
A. Employee benefit expenses 36398
Maternity leave benefits payble 36398
(Note:1)
(Recording of employee benefit
expense)
B. Maternity leave benefits payble 313
Cash 313
(53700-37440)/52
(Payment of parental benefits
for one week)
2 Maternity leave benefits payble 20414
Cash 20414
(Note:2)
(Benefits paid)
3 Maternity benefits payable at Dec 31,2017=Emplyee benefit expenses-Parental expenses for 9 weeks=36398-(9*313)=33584
Maternity benefits payable at Dec 31,2018=Maternity benefits payable at Dec 31,2017-Parental expenses for 1 year=33584-20414=13170
Notes:
1. Computation of employee benefit expense
Salary for 12 months 53700
Less:Employment insurance
(720*52) 37440
16260
Add:Salary for 6 months at 75%
(53700*6/12*75%) 20137.5
Employee benefit expense 36397.5
2. Maternity leave benefits paid for 2018
Top up for 1 year (53700-37440) 16260
Less:Benefits paid in 2017
(9 weeks*313) 2817
13443
Add:salary for 9 weeks at 75%
full pay
(20137.50*9/26) 6971
Benefits paid during 2018 20414
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