1. During its first year of operation, a manufacturer produced 100 items of trading stock and incurred the following expenses:

Raw materials$20,000

Direct labour$15,000

Depreciation on machinery$3,500

Administration$2,000

Storage$1,000

If there are 20 items on hand at 30 June, what is the value of stock at the s70-45 cost option?

A. $8,200

B. $8,000

C. $7,800

D. $7,600

2. An item of depreciating plant is purchased on 1 July at a cost of $20,000. It is depreciated at 40% on the diminishing balance basis and is used 80% for business purposes. What amount is deductible in the second year of ownership?

A. $6,400

B. $4,352

C. $3,840

D. $3,264

3. Which of the following is a depreciating asset in terms of s40-30?

(i) Kitchen cupboards in a rental property

(ii) Carpet in a rental property

(iii) A bridge at the gateway of a winery

(iv) Plumbing fixtures in facilities used by a companys employees

A. (ii) only

B. (ii) and (iv) only

C. (i), (ii) and (iv) only

D. (i), (ii) and (iii) only

4. Jing suffers life threatening injuries after being hit by a car when he is walking home from work. After spending 6 months in hospital Jing is able to leave but is declared too seriously injured to ever be able to work again. With the help of his solicitor, Jing takes legal action and as a result receives:

$500,000 from the insurer of the driver who hit him;

$15,000 in lost wages through a workers compensation payment; and

$100,000 for the permanent loss of the use of his right arm.

Which of the following best describes the income tax treatment of these amounts?

A. All of the amounts are assessable

B. None of the amounts are assessable as ordinary income

C. $15,000 is assessable as ordinary income

D. $515,000 is assessable

5. Which of the following cannot be included in a calculation of the cost base of a CGT asset?

A. An expense that is deductible under another provision of the Income Tax Assessment Acts

B. The money paid to buy the asset

C. Legal fees incurred in buying the asset

D. Interest on money borrowed to increase the assets value

6. Which of the following statements about fringe benefits tax (FBT) is correct?

A. Benefits that are provided to employees for work related purposes cannot be fringe benefits

B. An employer who provides a car to an employee for a year is providing the employee with a fringe benefit

C. Money spent on providing fringe benefits is usually not deductible under s8-1

D. Fringe benefits tax (FBT) is not deductible under s8-1

7. Which of the following statements about capital gains tax (CGT) is incorrect?

A. A capital gain or loss only arises if there is a CGT event

B. Net capital gains can be calculated by deducting capital losses from collectables from capital gains

C. Net capital gains are a form of statutory income

D. Indexation does not apply to capital losses

8. In FCT v Western Suburbs Cinemas Ltd the work undertaken on remedying the defect in the ceiling by replacing it completely was:

A. A capital improvement as the whole of the ceiling had been replaced with a better material

B. Not an allowable deduction because it was an initial repair

C. Allowed as a proportional deduction (the amount equal to the proportion of the ceiling that was in need of repair was deductible)

D. Completely deductible

9. Betty Peters owns a property from which she derives rental income. During the current tax year she recorded the following items as repairs:

Removal of linoleum floor coverings in the kitchen and polishing the existing timber floor$1,200

Replacement of a broken shower screen in the bathroom150

Replacement of a section of galvanised guttering with a new section of galvanised guttering300

The amount deductible as repairs under s25-10 is:

A. $1,650

B. $450

C. $300

D. $150

10. Lucy buys an investment property in Bendigo and immediately rents it out. One week later, the tenant ruins part of the carpet in the lounge room. Lucy replaces the ruined section with a new carpet.

Which of the following statements is correct?

A. The cost of the new carpet is not deductible under s25-10 ITAA97 due to being an initial repair

B. The cost of the new carpet is not deductible under s25-10 ITAA97 due to it being an improvement

C. The cost of the new carpet is deductible and should be deducted under s8-1 ITAA97

D. The cost of the new carpet is deductible and should be deducted under s25-10 ITAA97