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.

 

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 $640.18 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.

Required:

1. 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.

2. 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.

3. 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).

MERCEDES BENZ BRISBANE TAX INVOICE 194 Breakfast Creek Road ABN: 23 004 411 410 Newstead, QD, 4006. BENZ SOLD TO: INVOICE NUMBER: 4126 INVOICE DATE: 17 November 2019 Mr Corey Hart Sunglass World Pty Ltd ORDER NUMBER: 8633 SALES REPRESENTATIVE: Mr Michael Sembello 14 Queen Street Brisbane, QLD, 4000. DESCRIPTION AMOUNT * 2019 Mercedes C350 Class Sedan 81,000.00 Colour trim 2,156.50 Seat comfort package 1,872.00 Sunroof 2,448.00 Vision package Registration fee Compulsory third party (CTP) insurance Dealer delivery charges Stamp duty Luxury car tax 1,416.90 513.50 * 640.18 4,753.04 2,912.34 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