QUESTION 4 (please complete both parts A and B) 4 PART A The following information has been extracted from the accounts of Hawthorn Pty Ltd. (a resident private company) for the year ended 30 June 2020. Closing franking account balance on 30 June 2019 was a $10,000 surplus. Dividends received: 16/8/19 - $210,000 franked to 80% from BHP Ltd 22/11/19 - $140,000 fully franked from XYZ Pty. Ltd. 14/3/20 - $85,000 unfranked from ABC Plc. (a UK company, after $15,000 UK tax withheld) Dividends paid: 1/9/19 - $140,000 franked to 50% 18/5/20 - $700,000 franked to 30% Taxes paid 1/12/19 - Company income tax paid $80,000 31/3/20 - GST net amount paid $100,000 Required: Prepare a running balance franking account for Hawthorn Pty Ltd. for the year ended 30 June 2020. Explain the impact of each listed item. 4 PART B On 1 July 2017 Alpha Pty Ltd was capitalised by issuing ten ordinary shares each to A and B. Alpha carried on a computer importation and wholesale business and made a loss of $200,000 for the year ended 30 June 2018. On 1 July 2018, B sold all her shares to C. The company made another loss of $50,000 for the year ended 30 June 2019. D subscribed for 10 shares on 1 July 2019. In late July 2019 the company decided to add a network of retail outlets and provided a full sales and service to the public which it had never done before. For the year ended 30 June 2020 the taxable income of Alpha Pty Ltd was $300,000. Required: Fully explain with reference to legislation and case decisions the following issues: 1) Can the company deduct the 2018 loss in 2020? 2) Can the company deduct the 2019 loss in 2020? 3) Calculate the taxable income of Alpha Pty Ltd for 2020? 2020 $300,000 Year ending 30 June 2018 2019 Profit (loss) ($200,000) ($50,000) Shareholding A 10 10 10 B 10 0 0 10 10 0 0 10 20 20 30 0 QUESTION 4 (please complete both parts A and B) 4 PART A The following information has been extracted from the accounts of Hawthorn Pty Ltd. (a resident private company) for the year ended 30 June 2020. Closing franking account balance on 30 June 2019 was a $10,000 surplus. Dividends received: 16/8/19 - $210,000 franked to 80% from BHP Ltd 22/11/19 - $140,000 fully franked from XYZ Pty. Ltd. 14/3/20 - $85,000 unfranked from ABC Plc. (a UK company, after $15,000 UK tax withheld) Dividends paid: 1/9/19 - $140,000 franked to 50% 18/5/20 - $700,000 franked to 30% Taxes paid 1/12/19 - Company income tax paid $80,000 31/3/20 - GST net amount paid $100,000 Required: Prepare a running balance franking account for Hawthorn Pty Ltd. for the year ended 30 June 2020. Explain the impact of each listed item. 4 PART B On 1 July 2017 Alpha Pty Ltd was capitalised by issuing ten ordinary shares each to A and B. Alpha carried on a computer importation and wholesale business and made a loss of $200,000 for the year ended 30 June 2018. On 1 July 2018, B sold all her shares to C. The company made another loss of $50,000 for the year ended 30 June 2019. D subscribed for 10 shares on 1 July 2019. In late July 2019 the company decided to add a network of retail outlets and provided a full sales and service to the public which it had never done before. For the year ended 30 June 2020 the taxable income of Alpha Pty Ltd was $300,000. Required: Fully explain with reference to legislation and case decisions the following issues: 1) Can the company deduct the 2018 loss in 2020? 2) Can the company deduct the 2019 loss in 2020? 3) Calculate the taxable income of Alpha Pty Ltd for 2020? 2020 $300,000 Year ending 30 June 2018 2019 Profit (loss) ($200,000) ($50,000) Shareholding A 10 10 10 B 10 0 0 10 10 0 0 10 20 20 30 0
