(Note this question is from the Week 8 Tutorial)

Your client is a medium-sized manufacturing company and has provided you with its

accounting records for the financial year ending 30 June 2020.

The following amounts listed below from (a) - (f) are included in the accounting records. How

would you treat them for tax purposes?

(Note - The exact amounts are to be calculated and discussed in your response)

(a) The provision for long service leave for the employees is $35,000. The actual amount

paid during the year was $20,000 for the year ended 30 June 2020. (1 mark)

(b) The Insurance premium on the plant and equipment is $30,000, which was paid on 1

March 2020 for the next 12 months. (1 mark)

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(c) As at 30 June 2020, there was an outstanding electricity account for $2,000 and a

telephone account for $5,000 which are both still to be paid. (1 mark)

(d) A maintenance contract on the factory equipment for 12 months is $12,000. The

payment was made on 1 October 2019. (1 mark)

(e) The sum of $200,000 was paid on 1 August 2019 to the Managing Director as

compensation for the early termination of her employment contract. The employment

contract had one year to go. It would have ended on 30 July 2020. (1 mark)

(f) There is interest expense of $70,000 on a loan which has three years to run that was

originally used to purchase a computer repair business. The business ceased to

operate on 30 June 2020. (1 mark)

How would your answers to (b) and (d) change if your client is a small-sized company?