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Solutions to two accounting problems. The first problem calculates the gross remuneration of an employee given their basic salary and various allowances. The second problem calculates the discounted value of an annuity with a discount rate of 5% over 20 periods.
Typology: Exercises
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Question No. 1:
If the salary and allowances of an employee are as follows:
Basic Salary Rs : 16, 000
House Rent Allowance 45% Conveyance Allowance 10% Utilities Allowance 10% Group Insurance/Medical 0% Misc. Social Charges 6.5%
There are 12 Casual, 24 Earned (not availed) and no Sick leaves per year where as normal working days per month are 22. Calculate the Gross Remuneration of the Employee.
Sol: Basic Salary 16, 000
House Rent Allowance 0.45 16, 000 7, 200
Conveyance allowance 0.10 16, 000 1, 600
Utilities Allowance 0.10 16, 000 1, 600
Total Allowances 7, 200 1, 600 1, 600 10, 400
Gross Salary 16, 000 10, 400 26, 400
Sick Leave ( 0 days out of 22 12 ) 0
Leaves 2, 400 1, 200 3, 600
Total Social Charges 1, 716 3, 600 5,
Gross Remuneration Gross Salary Provident Fund Gratuity Fund Social Charges 26, 400 1, 454 1, 454 5,316 34, 624
Question No. 2:
Calculate the discount factor and discounted value when discount rate is 5%, number of periods is 20 and amount of annuity is Rs.20000.
Sol: Number of periods n= Amount of annuity R=Rs.
Discount factor = (1-1/ (1+i) n)/i = (1-1/ (1+0.05) 20 )/0. = (1-1/ (1.05) 20 )/0. = (1-1/2.65)/0.05. = (1-0.377)/0. =0.623/0. =12.
Discounted Value = 20000 (12.46) = 249200 or 249244