QUESTION FIFTEEN Ltd pays a lump sum on termination of service equal to 5% of fi
ID: 2413874 • Letter: Q
Question
QUESTION FIFTEEN Ltd pays a lump sum on termination of service equal to 5% of final salary TZS 00,000 and is assumed to increase at 10% (compound) each year. The for each year of service. The salary of Mr. Chapakazi in year 1 is 24,0 discount rate is 12% per annum. Mr. Chapakazí is expected to leave employment at the end of year 7 Required: Using the projected unit credit method, prepare a worksheet to show the present value of the benefit obligation of XYZ Ltd to Mr. Chapakazi and how it builds up over the seven years. You may use an extract of the table of future value interest factors (Appendix 3). Make your calculations to the nearest thousands, e.g. 212,500 should be taken as 213,000.Explanation / Answer
Ans. 15 -
Ans. 14 a. - The assets which can be traded are known as financial instruments. These assets can also be regarded as capital packages which can be traded. Financial Instruments provide an efficient transfer and flow of capital. These assets can either be cash, or a contract to deliver/receive cash, or evidence to the ownership of an entity.
14. b. i. The interest for year 1 will be - TSZ ((500,000,000*(1.148^1)) - 500,000,000) = 74,000,000
The interest for year 2 will be - TSZ ((500,000,000*(1.148^2)) - 500,000,000) = 158,952,000
The interest for year 3 will be - TSZ ((500,000,000*(1.148^3)) - 500,000,000) = 256,476,896
The interest for year 4 will be - TSZ ((500,000,000*(1.148^4)) - 500,000,000) = 368,435,476
The premium on the shares will be = ((500,000,000*1.02)-500,000,000) = 10,000,000
ii.
iii. The reason for there being a difference in the amounts is because that even though the rate of interest remains same, the principal to be paid back, reduces on a monthly basis. Thus, the interest amounts remains the same, but the principal changes due to repayment.
10. Salary A/c.....Debit..... TZS 832,000,000
To EPF A/c (Employee).......Credit.....TZS 41,600,000
To EPF A/c (Employer)........Credit....TZS 124,800,000
To Salary Payable A/c..........Credit....TZS 665,600,000
EPF A/c (Employee).......Debit.....TZS 41,600,000
EPF A/c (Employer)........Debit....TZS 124,800,000
To Bank A/c..........Credit....... TZS 166,400,000
Year 1 2 3 4 5 6 7 Salary 24,000,000 26,400,000 29,040,000 31,944,000 35,138,400 38,652,240 42,517,464 Discount Rate 1.12 1.25 1.40 1.57 1.76 1.97 2.21 Obligation 21,400,000 21,120,000 20,700,000 20,340,000 19,960,000 19,620,000 19,238,000 Interest @ 10% 2,140,000 2,112,000 2,070,000 2,034,000 1,996,000 1,962,000 1,923,800 Total Obligation 19,260,000 19,008,000 18,630,000 18,306,000 17,964,000 17,658,000 17,314,000Related Questions
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