Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

James Dean is the sole director and sole shareholder of Ride Like the Wind Pty Ltd. The company is a cycle wholesaler that imports and

James Dean is the sole director and sole shareholder of Ride Like the Wind Pty Ltd. The company is a cycle wholesaler that imports and sells a range of bicycles to retailers around Australia.

The company is registered for the GST and accounts for the GST on the non-cash (accruals) basis.

The company was incorporated in Australia in May 2014. The company had a turnover of $3.8 million in 2021 and is expecting a turnover of approximately $4.4 million for the 2022 financial year.

James informs you that on 12 January 2022, the company acquired a new motor vehicle, a 2022 Mercedes-Benz C350 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.

image text in transcribed

Amounts are shown inclusive of GST (where applicable). All amounts shown above totalling $88,600 have been charged to the customer by the motor car dealership. Assume that the CTP insurance of $412.00 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 that make up the total of $88,600, you 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.

(a) Please prepare an extract of the companys Income Statement for the year ended 30 June 2022 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.

194 Breakfast Creek Road Newstead, QLD, 4006. ABN: 66606816497

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Implementing Change With Clinical Audit

Authors: Richard W. Baker, Hilary M. Hearnshaw, Noelle Robertson

1st Edition

0471982571, 978-0471982579

More Books

Students also viewed these Accounting questions

Question

Describe the two major categories of tax services.

Answered: 1 week ago