Question
Hot Pink Batts Pty Ltd manufactures pink batts. The company wishes to use all available small business concessions to minimise taxable income. Hot Pink Batts
Hot Pink Batts Pty Ltd manufactures pink batts. The company wishes to use all available small business concessions to minimise taxable income. Hot Pink Batts Pty Ltd has prepared the following Profit & Loss Statement for the 2019 financial year:
| $ | $ |
Gross Sales |
| 2,400,000 |
Less Cost of Goods Sold |
|
|
Opening Stock | 33,000 |
|
Purchases and Manufacturing Costs | 1,250,000 |
|
| 1,283,000 |
|
Closing Stock | -300,000 | 983,000 |
Gross Profit |
| 1,417,000 |
Add Other Income |
|
|
Diesel Fuel Rebate (Government Subsidy) | 3,500 |
|
Dividend from American Company Note 1 | 8,000 |
|
Interest Income | 2,000 | 13,500 |
|
| 1,430,500 |
Expenses |
|
|
Gross Wages | 680,000 |
|
Superannuation | 62,000 |
|
Provisions for Customer Warranty Claims Note 2 | 30,000 |
|
Truck Expenses | 31,000 |
|
Accounting Depreciation Note 3 | 60,000 |
|
Share of Loss from Partnership with Al Insulation Pty Ltd | 13,000 |
|
Tax Related Expenditure Note 4 | 24,000 |
|
Other Deductible Expenses | 400,000 | 1,300,000 |
NET PROFIT BEFORE INCOME TAX |
| 130,500 |
NOTE 1
Hot Pink Batts Pty Ltd owns shares in an American company. The $8,000 dividend received from this investment is net of $4,000 tax withheld by USA government.
NOTE 2
The amount of warranty expenses paid to customers during the 2019 income year was
$11,000.
NOTE 3
Decline in Value for tax purposes needs to be determined using the following information:
General SBE Pool Balance at 30 June2018 $90,000 Purchase of New Machine on 1December2018 $98,000 Purchase of New Computer on 1February2019 $900
NOTE 4
Tax related expenditure is comprised of the following:
Payroll Tax | $ 7,000 |
Tax Agent Fees | $ 6,000 |
ATO Penalties | $ 4,000 |
ATO General Interest Charge | $ 7,000 |
NOTE 5
$50,000 of PAYG tax instalments were paid for the 2018/19 income year.
REQUIRED:
Using the templates provided:
- Prepare a statement reconciling net profit with taxable income
- Calculate the net tax payable by the company for the year, clearly showing all your workings
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started