All amounts are in New Zealand dollars and GST$-$exclusive unless otherwise stated. Please answer following question following NZ tax law.

Noodle Nation Limited $($NNL$)$ is a New Zealand tax resident company that operates a chain of noodle restaurants throughout the South Island. NNL has a standard $31$ March balance date and is registered for GST$.$

The company recorded an accounting profit before tax of $$2,150,000$ in its management accounts for the income year ended $31$ March $2024.$ You work for Spotlight Accounting Limited, and your task is to prepare the tax reconciliation to determine NNL$\text{'}$s taxable income so that you can later prepare its income tax return.

The company's internal accountant has provided the following additional information relating to NNL$\text{'}$s operations for the income year ended $31$ March $2024$:

$1.$ Included in NNL$\text{'}$s balance sheet is an amount of accrued interest income as at $31$ March $2024$ of $$15,000.$ The balance of the accrued interest income as at $31$ March $2023$ was $$11,000.$ Ignore the impact of the financial arrangements rules $($if any$).$

$2.$ The annual rental cost for a new restaurant in Wanaka is $$24,000.$ On $1$ October $2023,$ NNL prepaid the full year of rent to $30$ September $2024$ in advance. This payment was expensed in the management accounts.

$3.$ On $20$ March $2024,$ NNL$\text{'}$s Christchurch restaurant acquired a new deep fryer for $$900.$ This was entered in the accounting system as a fixed asset so it was not included in the accounting profit or loss. No depreciation was claimed for accounting purposes.

$4.$ Entertainment expenses included in accounting profit totalled $$3,500.$ Of this, $$3,000$ related to food and drink at staff functions that were not on the business premises. The remaining $$500$ related to food and drink consumed by one of NNL$\text{'}$s directors while travelling out of town to meet with suppliers. The director did not eat or drink with the suppliers.

$5.$ NNL$\text{'}$s Queenstown restaurant sometimes prepares catering orders for local businesses and events on credit arrangements for up to $60$ days. One of its customers ordered $$1,000$ worth of catering in June $2023,$ but by December $2023,$ it had gone into liquidation with the debt unpaid. NNL$\text{'}$s internal accountant wrote off the debt as bad in January $2024,$ and this was included in the management accounts.

 

 

Required:

$1.$Calculate NNL$\text{'}$s taxable income for the year ended $31$ March $2024$ by preparing a reconciliation from accounting profit to taxable income, identifying the required tax adjustments. Assume that NNL wishes to minimise its taxable income.

$2.$Briefly explain the income tax treatment of items $1,2,4$ and $5($even if the adjustment is nil$).$

$3.$For items $3$ and $5,$ cite a relevant legislative reference.

$15$ marks