Question 23 Green Country Limited is a distributor of domestic garden appliances throughout New Zealand and also carries out a number of other business transactions. Set out below is a list of balances extracted from the adjusted trail balance of the company as at financial year end date 31 March 2019: Accounts with Debit Balances Amount ($) Revaluation Loss Building 140,000 Depreciation Building 60,000 Depreciation Plant & Equipment 190,000 Depreciation Vehicle 75,000 Impairment Vehicle 5,000 Purchases 17,024,000 Doubtful Debts 10,000 Bad Debts 20,000 Audit Fees 40,000 Donation to religious organisations in New Zealand 35,000 Dividends paid (Net) 216,000 Interest Expense 150,000 Expenditure related to Rental of Office Building 320,000 Inventory as at 1 April 2018 250,000 Other Expenses 830,000 Net Loss Brought Forward 1 April 2018 114,000 Provisional Tax 120,000 Tax paid on Overseas Income 50,000 Fringe Benefit Tax 58,000 Resident Withholding Tax for Dividends received 10,000 Accommodation provided to an employee as part of 36,000 remuneration package Associated Persons' Remuneration 313,000 Use of Money Interest IRD 22,000 Salaries and Wages (Net) 1,820,000 PAYE 450,000 KiwiSaver Contributions 106,000 ACC Levies 25,000 Bonus, gratuity and retiring allowance to employees 43,000 Resident Withholding Tax on Contract Income 15,000 Contract Expenses 480,000 Accounts with Credit Balances Amount ($) Interest Income (Net) 18,000 Gain from Revaluation of Shares Available for sale 500,000 Gains from Revaluation of shares Held for trading 600,000 Income 34,229,000 Dividend Income (Net) 144,000 Rental Income of Office Building 240,000 Contract Income 520,000 Overseas Income 175,000 Additional Notes: Income for the year ended 31 March 2019 consists of the following: Sales 23,529,000 Income from trade tie arrangement Note 1 1,000,000 Gains from sale of shares Note 2 3,000,000 Licensing agreements receipts Note 3 500,000 Land Transactions Note 4 5.500.000 Income in relation to s CW1 Income Tax Act 2007 300,000 Income in relation to s CX42 Income Tax Act 2007 400.000 Total 34,229.000 Note 1: Green Country Limited entered into an exclusive arrangement with an Oil Company to only sell its brand of petrol for a period of 10 years. Green Country Limited also undertook that it would not establish a new service station business within five miles of its existing business for a period of five years without also agreeing to sell Shell products. Note 2: Green Country Limited systematically bought and sold shares. There was substantial repetition and turnover in buying and selling the shares Note 3: Green Country Limited entered into a series of "licence agreements" with various companies to supply information and manufacturing data to the companies and agreed to teach their technicians how to grow a new type of KIWI fruit. Note 4: The following land transactions were undertaken by Green Country Limited: Purchased a 50 hectare farm in 1 July 2013 for $2 million $4,000,000 and sold the land to a developer 30 June 2018 for $4 million The local council rezoned the land from farming to residential in December 2015. About 22% of the profit on sale resulted from the zoning change. Purchased 10 acres, containing a house, garage, and $900,000 barn for $1,220,000. The land value portion was $420,000. Council approval was obtained for a subdivision of seven acies, which was carried out, and the land subsequently sold for $900,000. Costs involved in the subdivision amounted to $55,000 including professional services of surveyor, solicitor and valuer; fencing felling and planting work, and the excavation of a driveway; removal of pine trees, a bush regeneration programme, stock-proof fencing, a site survey, the excavation of a driveway, and the planting of trees. The buildings and one acre of the remaining three acres are used for the Green Country Limited's_restoration business Made improvements costing $60,000 to a piece of land 5600,000 that was purchased in 2000 for $400,000. The improvements (not minor) were made on August 2008 and the land disposed for $600,000 in April 2018 TOTAL $5,500,000 . The cost of inventory as at 31 March 2019 is $225,000 and the net realisable value of the inventory is $200,000. In accordance with the Income Tax Act 2007, Green Country Limited has satisfied the continuity of shareholder test and therefore the company is allowed to carry forward the previous years' loss. The net tax loss brought forward from previous years is $70,000. The tax depreciation for the year ended 31 march 2019 are as follows: The annual tax depreciation rate for buildings is 0% The total tax depreciation for Plant and Equipment is $120,000 The total tax depreciation for Vehicles is $80,000 The provisional tax account for year ended 31 March 2019 is as follows: Date 1/4/2018 9/5/2018 28/8/2018 15/1/2019 Accounts Balance b/d Bank Bank Bank Provisional Tax A/C Amount Date Account 150,000 31/3/2019 Tax Payable 40,000 31/3/2009 Balance cd 40,000 40.000 270.000 Amount 150,000 120,000 270.000 Details of expenditure related to rental of office building is provided below: Rental Agency Commission 25,000 Apportionment of Repairs and Maintenance 173,000 Apportionment of Insurance 5,000 Apportionment of rates 9,000 Apportionment of Building Depreciation 23,000 Apportionment of interest expense 50,000 Administration 35,000 320.000 An examination of the ledger account, shows that other expenses comprises of the following: $ Professional and consulting fees 40,000 Bank service charges 10,000 Fines and penalties 11,000 Entertainment expenses 25,000 Repairs and Maintenance 240,000 Loss caused by misappropriation by employees 5,000 Expenses in relation to s CW1 Income Tax Act 2007 150,000 Expenses in relation to s CX42 Income Tax Act 2007 250,000 Insurance 40,000 Rates 59.000 830,000 Entertainment expenses Entertainment that promotes business where the public has the same access as the $805 employees, business contacts and people associated with the business Freebies given to customers promoting business $1,490 Meals employees bought while travelling on business $1,978 Snacks and drinks served at business's trade display $1,196 Overseas entertainment provided to promote the company's products $12.217 Entertainment at sports and cultural events (including in a corporate box) $1,703 Bottles of wine provided to each customer who buys a company's product $460 amounting to more than $1,000 Boat hire and providing food and drinks to people on it 4,001 Food and drink provided for social events in an area set aside for senior employees 1,150 Total $25,000 Required: Prepare the Financial Statements Summary Extract of IR10: all boxes until box 29) for year ended 31 March 2019 for Green Country Limited Question 24 Prepare the Income Tax Return Companies (IR 4: Boxes in Sections 12-29) for the period 1 April 2018 to 31 March 2019 for Green Country Limited Question 23 Green Country Limited is a distributor of domestic garden appliances throughout New Zealand and also carries out a number of other business transactions. Set out below is a list of balances extracted from the adjusted trail balance of the company as at financial year end date 31 March 2019: Accounts with Debit Balances Amount ($) Revaluation Loss Building 140,000 Depreciation Building 60,000 Depreciation Plant & Equipment 190,000 Depreciation Vehicle 75,000 Impairment Vehicle 5,000 Purchases 17,024,000 Doubtful Debts 10,000 Bad Debts 20,000 Audit Fees 40,000 Donation to religious organisations in New Zealand 35,000 Dividends paid (Net) 216,000 Interest Expense 150,000 Expenditure related to Rental of Office Building 320,000 Inventory as at 1 April 2018 250,000 Other Expenses 830,000 Net Loss Brought Forward 1 April 2018 114,000 Provisional Tax 120,000 Tax paid on Overseas Income 50,000 Fringe Benefit Tax 58,000 Resident Withholding Tax for Dividends received 10,000 Accommodation provided to an employee as part of 36,000 remuneration package Associated Persons' Remuneration 313,000 Use of Money Interest IRD 22,000 Salaries and Wages (Net) 1,820,000 PAYE 450,000 KiwiSaver Contributions 106,000 ACC Levies 25,000 Bonus, gratuity and retiring allowance to employees 43,000 Resident Withholding Tax on Contract Income 15,000 Contract Expenses 480,000 Accounts with Credit Balances Amount ($) Interest Income (Net) 18,000 Gain from Revaluation of Shares Available for sale 500,000 Gains from Revaluation of shares Held for trading 600,000 Income 34,229,000 Dividend Income (Net) 144,000 Rental Income of Office Building 240,000 Contract Income 520,000 Overseas Income 175,000 Additional Notes: Income for the year ended 31 March 2019 consists of the following: Sales 23,529,000 Income from trade tie arrangement Note 1 1,000,000 Gains from sale of shares Note 2 3,000,000 Licensing agreements receipts Note 3 500,000 Land Transactions Note 4 5.500.000 Income in relation to s CW1 Income Tax Act 2007 300,000 Income in relation to s CX42 Income Tax Act 2007 400.000 Total 34,229.000 Note 1: Green Country Limited entered into an exclusive arrangement with an Oil Company to only sell its brand of petrol for a period of 10 years. Green Country Limited also undertook that it would not establish a new service station business within five miles of its existing business for a period of five years without also agreeing to sell Shell products. Note 2: Green Country Limited systematically bought and sold shares. There was substantial repetition and turnover in buying and selling the shares Note 3: Green Country Limited entered into a series of "licence agreements" with various companies to supply information and manufacturing data to the companies and agreed to teach their technicians how to grow a new type of KIWI fruit. Note 4: The following land transactions were undertaken by Green Country Limited: Purchased a 50 hectare farm in 1 July 2013 for $2 million $4,000,000 and sold the land to a developer 30 June 2018 for $4 million The local council rezoned the land from farming to residential in December 2015. About 22% of the profit on sale resulted from the zoning change. Purchased 10 acres, containing a house, garage, and $900,000 barn for $1,220,000. The land value portion was $420,000. Council approval was obtained for a subdivision of seven acies, which was carried out, and the land subsequently sold for $900,000. Costs involved in the subdivision amounted to $55,000 including professional services of surveyor, solicitor and valuer; fencing felling and planting work, and the excavation of a driveway; removal of pine trees, a bush regeneration programme, stock-proof fencing, a site survey, the excavation of a driveway, and the planting of trees. The buildings and one acre of the remaining three acres are used for the Green Country Limited's_restoration business Made improvements costing $60,000 to a piece of land 5600,000 that was purchased in 2000 for $400,000. The improvements (not minor) were made on August 2008 and the land disposed for $600,000 in April 2018 TOTAL $5,500,000 . The cost of inventory as at 31 March 2019 is $225,000 and the net realisable value of the inventory is $200,000. In accordance with the Income Tax Act 2007, Green Country Limited has satisfied the continuity of shareholder test and therefore the company is allowed to carry forward the previous years' loss. The net tax loss brought forward from previous years is $70,000. The tax depreciation for the year ended 31 march 2019 are as follows: The annual tax depreciation rate for buildings is 0% The total tax depreciation for Plant and Equipment is $120,000 The total tax depreciation for Vehicles is $80,000 The provisional tax account for year ended 31 March 2019 is as follows: Date 1/4/2018 9/5/2018 28/8/2018 15/1/2019 Accounts Balance b/d Bank Bank Bank Provisional Tax A/C Amount Date Account 150,000 31/3/2019 Tax Payable 40,000 31/3/2009 Balance cd 40,000 40.000 270.000 Amount 150,000 120,000 270.000 Details of expenditure related to rental of office building is provided below: Rental Agency Commission 25,000 Apportionment of Repairs and Maintenance 173,000 Apportionment of Insurance 5,000 Apportionment of rates 9,000 Apportionment of Building Depreciation 23,000 Apportionment of interest expense 50,000 Administration 35,000 320.000 An examination of the ledger account, shows that other expenses comprises of the following: $ Professional and consulting fees 40,000 Bank service charges 10,000 Fines and penalties 11,000 Entertainment expenses 25,000 Repairs and Maintenance 240,000 Loss caused by misappropriation by employees 5,000 Expenses in relation to s CW1 Income Tax Act 2007 150,000 Expenses in relation to s CX42 Income Tax Act 2007 250,000 Insurance 40,000 Rates 59.000 830,000 Entertainment expenses Entertainment that promotes business where the public has the same access as the $805 employees, business contacts and people associated with the business Freebies given to customers promoting business $1,490 Meals employees bought while travelling on business $1,978 Snacks and drinks served at business's trade display $1,196 Overseas entertainment provided to promote the company's products $12.217 Entertainment at sports and cultural events (including in a corporate box) $1,703 Bottles of wine provided to each customer who buys a company's product $460 amounting to more than $1,000 Boat hire and providing food and drinks to people on it 4,001 Food and drink provided for social events in an area set aside for senior employees 1,150 Total $25,000 Required: Prepare the Financial Statements Summary Extract of IR10: all boxes until box 29) for year ended 31 March 2019 for Green Country Limited Question 24 Prepare the Income Tax Return Companies (IR 4: Boxes in Sections 12-29) for the period 1 April 2018 to 31 March 2019 for Green Country Limited