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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:

  1. Prepare a statement reconciling net profit with taxable income

  1. Calculate the net tax payable by the company for the year, clearly showing all your workings

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