Opal, a resident company, was incorporated in 2001. The company has developed a revolutionary lithium battery for electric cars, which it manufactures in Australia and exports overseas to its branch offices for distribution. During the year ended 30 June 2021, Opal expanded its operations by acquiring the assets of WM Pty Ltd. As at 25 October 2020, the cost of this acquisition was $3,240,000 constituting the following items:

The following information has been extracted from accounting records of Opal for the year ended 30 June 2021.

Other information

1) In January 2021, Opal lent $700,000 to a subsidiary company, Opal Plus Pty Ltd, for a period of 5 years at an interest rate of 10% pa. It was an interest only loan with the full principal required to be paid to Opal at the end of the 5-year period. In March 2021, Opal sold the right to receive interest for the 5-year period to CP Bank for a lump sum payment of $280,000.

2) On 1 January 2021, Opal borrowed $250,000 for three years at 8% interest to finance working capital. The borrowing costs amounted to $3,200.

3) Depreciation It is the company policy to adopt the same tax rate of depreciation for accounting purposes on all fixed (non-current) assets other than buildings. The accounting depreciation of buildings amounted to $30,000 for 2020/2021. Apart from the extension to the office buildings all buildings were constructed prior to 1960. The company has elected to depreciate all assets (including motor vehicles) on the prime cost method and not diminishing value.

Depreciation in the accounting report includes all assets acquired during the year, and excludes any profit or loss on the sale of a depreciating asset.

REQUIRED:

Calculate Opals taxable income and income tax payable for 30 June 2021. You are to use the attached table to complete your tax reconciliation/calculate tax payable.

$ Land Buildings - constructed in 1968 Accounts receivable (Debtors) Plant and machinery Goodwill 1,700,000 700,000 100,000 540,000 200,000 Total cost of acquisition 3,240,000 $ Revenue Gross trading income Interest received from US bank after 15% US withholding tax was deducted 4,070,000 12,500 Interest on debenture in a resident public company Profit on sale of fixed asset - furniture Lump Sum form CP Bank Profit on sale of Land 24,000 5,200 280,000 40,000 Total revenue 4,431,700 $ 3,200 190,000 Expenses Cost of borrowing funds to finance working capital Depreciation (includes depreciation of building) Entertainment expenses Legal expenses Loss from collection of trade debtors acquired on acquisition of WM 74,000 96,000 44,000 152,000 185,000 20,000 Provision for annual leave Repairs and maintenance Write off of one-tenth of Goodwill Other expenses (all allowable deductions) Total expenses Net profit 1,600,000 2,364,200 2,067,500 4) Fixed assets disposed of during year were: Furniture - Cost 16 January 2019 Written down value for accounts/adjusted value for tax Proceeds on 20 June 2021 $8,000 $5.852 $11.052 5) Additions to fixed assets during the year: Extension to office building Construction commenced on August 2020 and occupation on 1 June 2021 $300,000 Motor vehicle (100% business usage) Purchased on July 2020; estimated life 8 years 585,000 6) Entertainment expenses of S74,000 were spent on meals at restaurants. The company records show that 100% of the total expenditure was for entertainment of business clients. 7) Legal fees 596,000 comprised: Debt collection $5,000 Recrafting the company's constitution S6,000 Defending directors against criminal charges $85.000 8) Annual leave paid during the year was $80.500 9) The company has incurred the following expenses which are classified as repairs and maintenance in its accounting records. Cost incurred in early November 2020 to replace the roof of an administrative office building acquired from WM. The work was completed on 1 February 2021 S80.000 Cost of converting an old warehouse into a lunch room and change room for company employees. Completed 1 May 2021 with an estimated life of five years: Installation of showers and toilets $40,000 Partitioning and panelling the walls $20.000 Furniture for the lunchroom $10.000 Repairs to machinery S35.000 $ Land Buildings - constructed in 1968 Accounts receivable (Debtors) Plant and machinery Goodwill 1,700,000 700,000 100,000 540,000 200,000 Total cost of acquisition 3,240,000 $ Revenue Gross trading income Interest received from US bank after 15% US withholding tax was deducted 4,070,000 12,500 Interest on debenture in a resident public company Profit on sale of fixed asset - furniture Lump Sum form CP Bank Profit on sale of Land 24,000 5,200 280,000 40,000 Total revenue 4,431,700 $ 3,200 190,000 Expenses Cost of borrowing funds to finance working capital Depreciation (includes depreciation of building) Entertainment expenses Legal expenses Loss from collection of trade debtors acquired on acquisition of WM 74,000 96,000 44,000 152,000 185,000 20,000 Provision for annual leave Repairs and maintenance Write off of one-tenth of Goodwill Other expenses (all allowable deductions) Total expenses Net profit 1,600,000 2,364,200 2,067,500 4) Fixed assets disposed of during year were: Furniture - Cost 16 January 2019 Written down value for accounts/adjusted value for tax Proceeds on 20 June 2021 $8,000 $5.852 $11.052 5) Additions to fixed assets during the year: Extension to office building Construction commenced on August 2020 and occupation on 1 June 2021 $300,000 Motor vehicle (100% business usage) Purchased on July 2020; estimated life 8 years 585,000 6) Entertainment expenses of S74,000 were spent on meals at restaurants. The company records show that 100% of the total expenditure was for entertainment of business clients. 7) Legal fees 596,000 comprised: Debt collection $5,000 Recrafting the company's constitution S6,000 Defending directors against criminal charges $85.000 8) Annual leave paid during the year was $80.500 9) The company has incurred the following expenses which are classified as repairs and maintenance in its accounting records. Cost incurred in early November 2020 to replace the roof of an administrative office building acquired from WM. The work was completed on 1 February 2021 S80.000 Cost of converting an old warehouse into a lunch room and change room for company employees. Completed 1 May 2021 with an estimated life of five years: Installation of showers and toilets $40,000 Partitioning and panelling the walls $20.000 Furniture for the lunchroom $10.000 Repairs to machinery S35.000