Forecasted figures for income budget for the next two years are given below; all derived using forecasting techniques. Assume the company is paying tax at 30% rate.

Current year

Year 2

Year 3

INCOME

70,000

90 000

See below

DEDUCTIONS

30,000

40,000

See below

These were developed using forecasting techniques.

Calculate future tax liability for each year by completing the table below.

NOTE the current tax liability is $15,750.

Breakdown of year 3 income:

Trading receipts$75,000

Dividends franked (franking credit $3,000)$7,000

Unfranked dividends$15,000

Breakdown of year 3 deductions:

Depreciation on the motor vehicleTo be calculated

Other deductions$48,125

In year 3 two changes will be implemented:

The company diversifies into acquiring shares

The company will acquire a new motor vehicle on the 1^stJanuary of year 3 for $55,000 which has an effective life of 8 years. This will be for the managing director, which sees Deductions for that year increase substantially.

Current year

Year 2

Year 3

INCOME

70,000

90 000

See below

DEDUCTIONS

17,500

40,000

See below

Tax payable