Question
Luxwood is a resident private company established in 2011 to manufacture quality furniture that is sold to retailers under several brand names and directly to
Luxwood is a resident private company established in 2011 to manufacture quality furniture that is sold to retailers under several brand names and directly to the public. In respect of each task, the requirement is that you:
- Identify the issue/issues raised
- Identify and discuss the relevant provisions of the legislation, case law, ATO rulings and determinations of Australia.
- Advise the company what amounts are assessable or deductible for each Task.
Note: Disregard GST and Small Business Entity related matters You will not receive marks for discussing these. No need to consider GST
Task 2 Luxwood prides itself on its no questions asked refund policy for return of defective goods. It has gathered statistics over the previous 8 years since it adopted this policy and it concludes, as a reliable estimate, that of all its refunds under this policy, 60% are covered by supplier warranties. It bears the balance as a cost of doing business. In this respect the store has made the following entry in its journal for the year ended 30 June 2020:
Dr. | Profit and Loss | 25,000 |
Cr. | Provision for warranties | 25,000 |
Narration: Being 40% of estimated refunds for claims in respect of defective goods sold during the year ended 30 June2020 for which no supplier warranty is available.
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