Question 5

a) A retail store was burgled during a holiday weekend and leather jackets and handbags, which cost the business $93,000, were stolen. The thieves were not caught and none of the stolen goods were recovered. The store made a claim on their insurance policy, but the insurance company only reimbursed $65,000.

Task: Explain how the loss and the insurance recovery will be treated for income tax purposes and provide relevant statutory references.

b) As at 31 March 2023 an analysis of the expenditure of a company shows that the amounts listed below relate to the period after 31 March 2023. The expenditure has not been treated as prepaid for accounting purposes. This expenditure was all incurred during the 2023 tax year and is deductible.

Task: Calculate and discuss what adjustment, if any, must be made to the companys assessable income in respect of these prepayments. Provide relevant statutory references.

\begin{tabular}{|l|c|} \hline Rent of a warehouse for April to June 2023 inclusive & $18,750 \\ \hline Consumable aids & $84,620 \\ \hline Contractformaintenanceofequipment,fortheperiod1Aprilto31August2023inclusive(totalcontractpricefortheincomeyearis$36,000).Themaintenancecontractdidnotformpartoftheconsiderationfortheequipment & $15,000 \\ \hline Advertising for period April to June 2023 (inclusive) & $7,400 \\ \hline AdvanceNewZealandbusinesstravelandhotelaccommodation(alltobecompletedby30September2023) & $6,240 \\ \hline Membershipsubscriptions(6monthspaidto30September2023) & $1,850 \\ \hline & $133,860 \\ \hline \end{tabular}