Ignore (iv)

PBL 1 - Part A (Group Discussion and Group Written Submission -7%) One of your clients, Corey Hart, is the sole director and sole shareholder of Sunglass World Pty Ltd. The company is a retail store that specialises in selling a range of designer-label high-end sunglasses The company is registered for the GST and accounts for the GST on the non cash (accruals) basis. The company has three stores - one in the Brisbane CBD, the other in Indooroopilly and the third store in Surfers Paradise on Queensland's Gold Coast The company was incorporated in Australia in May 2010. The company had a turnover of $2.4 million in 2019 and is expecting a turnover of approximately $2.6 million for the 2020 financial year. The company is likely to have a taxable income of approximately $160,000 in respect of the year ended 30 June 2020. Corey informs you that on 17 November 2019, the company acquired a new motor vehicle, a 2019 Mercedes C350 Class Sedan, which was financed via a chattel mortgage agreement A copy of the tax invoice for the purchase of the new car is attached for your reference on the following page 2019 Mercedes C350 Class Sedan MERCEDES BENZ BRISBANE TAX INVOICE 194 Breakfast Creek Road Newstead, 0, 4006 ABN: 23 004 411 410 SOLD TO: Mr Corey Hart Sunglass World Pty Ltd 14 Queen Street Brisbane, QLD, 4000 INVOICE NUMBER: INVOICE DATE: ORDER NUMBER SALES REPRESENTATIVE 4126 17 November 2019 8633 Mr Michael Sembello DESCRIPTION AMOUNT 2019 Mercedes C350 Class Sedan Colour trim Seat comfort package Sunroof Vision package Registration fee Compulsory third party (CTP) insurance Dealer delivery charges Stamp duty Luxury car tax 81,000.00 2.156.50 1,872.00 2,448.00 1,416.90 513.50 640.18 4.753.04 2,91234 2.287.54 Total amount payable (drive away price): $ 100,000.00 Payments received: Hightower Finance Company - chattel mortgage 100.000,00 Balance due: $ 0.00 Amounts are shown inclusive of GST (where applicable). All amounts shown above totalling $100,000 have been charged to the customer by the motor car dealership Assume that in this PBL the CTP insurance of 5640.28 shown above is exclusively GST-free. In practice. CTP insurance has a component that is GST-free (the stamp duty component) and a component that is taxable. There is no GST on the registration fee. Hint: For each of the costs detailed above thet make up the total of $100,000, students need to work out which costs would be capitalised and therefore form part of the cost of the motor vehicle in the Balance Sheet) and which costs would be expensed to the income Statement Required 0 () (II) Prepare a chattel mortgage schedule for the new motor vehicle (in EXCEL) taking into account the effects of the GST. Please start your schedule on 17 November 2019 and show each monthly chattel mortgage repayment in the schedule thereafter. Please total all columns of your EXCEL spreadsheet. Please prepare an extract of the company's Income Statement for the year ended 30 June 2020 showing relevant expense accounts relating specifically to this transaction. Please ignore ongoing operating costs of the car, such as petrol and oil and repairs and maintenance. At this stage, these costs are indeterminable. Prepare an extract of the company's Balance Sheet showing the asset (ie the motor vehicle) and the associated outstanding chattel mortgage liability as at 30 June 2020. Please show your workings as to how you have calculated the cost of the new motor vehicle in the Balance Sheet. Students are only required to show the cost of the motor vehicle (and any accumulated depreciation) as well as the amount owing in relation to the chattel mortgage liability at 30 June 2020. There is no need to prepare detailed notes to the accounts and no need to draft the accounting policy note (Note 1). Prepare a letter to Corey (on your group's letterhead) advising him as to how much is tax-deductible to the company in relation to this transaction for the year ended 30 June 2020. Please show your calculations. (IV) Notes for Students: 1 The question is not about ascertaining the ongoing running costs of the car. In other words, students do not need to ask questions relating to how much the operating costs of the car are eg. petrol and oil and repairs and maintenance). 2 When writing your letter for part (iv), please briefly refer to relevant sections from the ITAA (1997) in your answer. 3 There is no need to write or prepare the Note 1: Statement of Significant Accounting Policies note in the extract of your external financial statements or any other accounting notes apart from what is requested. 4. For taxation purposes, Sunglass World Pty Ltd is considered a small business entity (SBE) as it has an annual turnover of less than $10 million. However, despite this, assume that the company does not wish to take advantage of the simplified depreciation regime available to small business entity (SBE) taxpayers. Instead, you can assume that the company wishes to use the same depreciation rates for both accounting and tax purposes. The company wishes to depreciate the car over eight (8) years for both accounting and taxation purposes using the diminishing value depreciation method. Furthermore, assume that at the end of the useful life of the motor vehicle, the estimated residual value is Nil. This means that the depreciation figures in respect of the motor vehicle will be the same for both accounting and taxation purposes. Once again, please use the diminishing value depreciation method for both accounting and taxation depreciation calculations. 5. There are a total of 227 days from 17 November 2019 to 30 June 2020. Please use 366 days for all accounting and income tax calculations as 2020 was a leap year. 6. Please calculate interest on a monthly basis. 7. Ignore any accrued interest arising in respect of the chattel mortgage repayments from 17 June to 30 June each year. In other words, the outstanding chattel mortgage liability at 30 June 2020 is effectively the amount of the outstanding chattel mortgage liability at 17 June 2020