Question
a)Review and complete the cash budget for 6 months to June. In preparing the budget we will have to calculate PAYG tax instalment in line
a)Review and complete the cash budget for 6 months to June. In preparing the budget we will have to calculate PAYG tax instalment in line with the very latest assessment of tax (i.e. the latest notional tax figure).
Cash Budget for 6 months to June
ITEM
JAN.
$000's
FEB
$000's
MAR
$000's
APR
$000's
MAY
$000's
JUN
$000's
Total
$000's
Sales (all cash)
21
26
21
17
20
20
Other income
2
0
2
0
2
0
TOTAL
Purchases (all Cash)
10
8
8
7
8
6
Utilities (Teleph etc)
4
3
3
3
4
5
Accounting fees
0
6
0
0
2
0
Rates
0
0
0
16
0
0
Insurance
13
0
0
0
7
0
Motor veh running expenses
3
3
3
3
3
3
Tax
Sundry
0
0
2
1
1
1
TOTAL
Increase (dec) in cash
Balance beginning
10
Balance end
b)Complete the quarterly cash budget for 12 months to the end of December, showing the last three months by month.
Cash Budget:
ITEM
Ist QTR.
$000's
2ndQTR
$000's
3rdQTR
$000's
OCT
$000's
NOV
$000's
DEC
$000's
4thQTR
$000's
Total
$000's
Sales (all cash)
68
57
60
20
19
30
69
254
Other income
4
2
5
2
1
2
5
16
TOTAL
Purchases (all Cash)
26
21
22
8
12
9
29
98
Utilities (Teleph etc)
10
12
11
5
5
4
14
47
Accounting fees
6
2
3
3
0
0
3
14
Rates
0
16
0
0
4
0
4
20
Insurance
13
7
0
4
0
0
4
24
Motor veh running expenses
9
9
9
3
3
3
9
36
Tax
5
7.5
14.5
7.5
0
0
7.5
34.5
Sundry
2
3
4
1
0
2
3
12
TOTAL
Increase (dec) in cash
Balance beginning
10
11
Balance end
11
Note the tax for the quarter of June is made up of two amounts $7,000 for franking deficit tax (FDT) and $7,500 for the normal PAYG tax instalment. You should comment on the reason why this change in tax amounts is increased.
c)Prepare a variance report for the 12 months to December
ITEM
Total
Budgeted
$000's
Total
Actual cash
$000,s
Variance
$000's
Variance
Favourable
unfavourable
Sales (all cash)
254
256
Other income
16
17
TOTAL
Purchases (all Cash)
98
99
Utilities (Teleph etc)
47
46
Accounting fees
14
15
Rates
20
20
Insurance
24
22
Motor veh running expenses
36
39
Tax
34.5
36.6
Sundry
12
10
TOTAL
d)Comment on the tax expense of $36,600, given you are told that there was a $3,000 excessive overfranking penalty. State why it is not necessarily an error. How can the company adjust their strategy/ies of paying dividends to shareholders, to prevent a recurrence of what happened in the past year? Consider any personnel the organisation may care to appoint.
e)The directors have proposed a Board meeting for next Monday, and they have asked you to come and report on the performance of their tax plans.
Monitor the tax plans that were put in place including all changes and amendments made as a result of tax implications and other influencing factors.
Write a report to the directors of the company outlining your findings. Your findings must include the following information:
Tax plan they sought to implement (i.e. Including details of the 3 changes to tax obligations, e.g. PAYG tax instalments)
The implementation and monitoring of that plan (including any management processes used (e.g. internal controls, budgetary controls etc.)
The results of the year, particularly their variance for tax expense; what caused it, and how it can be better monitored or controlled into the future.
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Accounting Chapters 14-26
Authors: Carl Warren
27th Edition
1337272116, 978-1337272117
