An analysis of the companys bank statements for its mortgage account revealed the following Interest Paid 25 09 18 $100,000 Interest Paid 30 12 18 $80,000 Interest Paid 25 03 19 $150,000 Interest Paid 21 06 19 $120,000 Interest Paid 25 09 19 $200,000 Interest Paid 28 12 19 $250,000 Interest Paid 25 03 20 $190,000 Interest Paid 21 06 20 $220,000 An analysis of the companys bank statements for its investment account revealed the following Interest Received 21 08 17 $80,000 Interest Received 23 10 17 $75,000 Interest Received 24 12 17 $120,000 Interest Received 18 02 19 $150,000 Interest Received 24 04 19 $165,000 Interest Received 22 06 19 $180,000 Interest Received 28 08 19 $200,000 Interest Received 29 10 19 $300,000 Interest Received 24 12 19 $90,000 Interest Received 19 02 20 $100,000 Interest Received 23 04 20 $55,000 The company has one non current liability which is the only liability on which interest is charged This is a 25 year mortgage over its real assets land and buildings with the Tolkien Building Society The principal amount of the mortgage is $10 million and the applicable interest rate is 6 per annum Assume that simple interest (no compounding) was used Any interest expense amount accruing on this mortgage for the current year has already been correctly accrued and accounted for The company has one interest income generating asset This is an investment with a principal amount of $17 million which was invested at January 1, 2019 at 10 per annum for the entire year Assume that simple interest (no compounding) was used Any interest income amount accruing on this investment for the current period has already been correctly accrued and accounted for Short Answer Question 3 Using the information in notes 11 14 above, calculate the interest expense adjustment for taxation purposes Please show all workings and state any assumptions made on the lines provided below (5 marks) Short Answer Question 4 Using the information in notes 11 14 above, calculate the interest income adjustment for taxation purposes Please show all workings and state any assumptions made on the lines provided below (5 marks)

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jul 19, 2024

An analysis of the companys bank statements for its mortgage account revealed the following: Interest Paid 25.09.18 $100,000 Interest Paid 30.12.18 $80,000 Interest Paid 25.03.19

An analysis of the companys bank statements for its mortgage account revealed the following:

Interest Paid 25.09.18 $100,000

Interest Paid 30.12.18 $80,000

Interest Paid 25.03.19 $150,000

Interest Paid 21.06.19 $120,000

Interest Paid 25.09.19 $200,000

Interest Paid 28.12.19 $250,000

Interest Paid 25.03.20 $190,000

Interest Paid 21.06.20 $220,000

An analysis of the companys bank statements for its investment account revealed the following:

Interest Received 21.08.17 $80,000

Interest Received 23.10.17 $75,000

Interest Received 24.12.17 $120,000

Interest Received 18.02.19 $150,000

Interest Received 24.04.19 $165,000

Interest Received 22.06.19 $180,000

Interest Received 28.08.19 $200,000

Interest Received 29.10.19 $300,000

Interest Received 24.12.19 $90,000

Interest Received 19.02.20 $100,000

Interest Received 23.04.20 $55,000

The company has one non-current liability which is the only liability on which interest is charged. This is a 25-year mortgage over its real assets land and buildings with the Tolkien Building Society. The principal amount of the mortgage is $10 million and the applicable interest rate is 6% per annum. Assume that simple interest (no compounding) was used. Any interest expense amount accruing on this mortgage for the current year has already been correctly accrued and accounted for.

The company has one interest income generating asset. This is an investment with a principal amount of $17 million which was invested at January 1, 2019 at 10% per annum for the entire year. Assume that simple interest (no compounding) was used. Any interest income amount accruing on this investment for the current period has already been correctly accrued and accounted for.

Short Answer Question #3

Using the information in notes 11 14 above, calculate the interest expense adjustment for taxation purposes. Please show all workings and state any assumptions made on the lines provided below. (5 marks)

____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Short Answer Question #4

Using the information in notes 11 14 above, calculate the interest income adjustment for taxation purposes. Please show all workings and state any assumptions made on the lines provided below. (5 marks)