Question

In regard to employee benefits, on October 20, 2X13, the CFO of Scare Crow PLC in London is committed to terminating Aunt Emma on December 31, 2X13 and will be offering her a benefit package of 100,000 British Pounds Sterling. Aunt Emma is qualified to retired from Scare Crow on December 31, 2X16. The proper treatment of this decision is

Answer 1

1 October 31, 2X13 statement: Debit termination expense for 100,000 British Pounds Sterling, Credit termination payable 100,000 British Pounds Sterling

Step-by-step explanation:

The proper treatment of this decision is as follow

The benefits package cost of 100,000 British pounds will be recorded as an expense in the termination expense account. A debit entry in this account will be recorded.

On the other hand, the payment is not made to Aunt Emma, so liability will be created to record the offer of the benefits package. A credit entry in the Termination payable ( Aunt Emma ) account to record the liability equal value recorded in the expense account.

The Journal Entry will be as follow

Dr. Termination expense_100,000 British Pounds Sterling,

Cr. Termination payable _100,000 British Pounds Sterling