Step 5:In the Tax Computation schedule worksheet (Tab No: 5) prepare the tax computations for the tax year 2015/16.

1. Royal Watch Ltd is a manufacturer and exporter of fashion watches and designer decorative clocks. Its activities have not changed during the tax year 2015/16. 2. For accounting purpose, the company uses the straight-line method to depreciate assets. For taxation purpose, it chooses to use the diminishing value method to depreciate its assets and chooses the option of self-assessment of the asset's effective life to calculate the lives of depreciating assets (Section 40-95 ITAA97). All assets are purchased post 10 May 2006 and the leasehold improvement is in relation to the leased office. The opening adjustable values are: Asset Plant and Machinery Leasehold improvement Office Equipment Effective Live 10 years 15 years 4 years Opening adjustable value $3,125,052 $1,635,988 $250, 635 3. The opening adjustable value of the plant and machinery disposed of during the year was $368,000 and the proceeds of $280,356 from the sale of these assets was received on 1 September 2015 4. The company purchased office equipment of $50,890 on 1 November 2015. 5. The company depreciates the factory premises over 40 years for both accounting and taxation purposes. The construction cost of the factory premises is $2,014,600 and the opening adjustable value is $ 1,611,680 6. Among the entertainment expenses, $38,450 was for food and drinks provided during five whole day in-house seminars attended by clients and employees. The balance was for lunches and dinners with customers. 7. Among the legal fees, the company incurred $68,300 legal fees in defending a lawsuit against its director, John who fought with the plaintiff during a Friday day drink with colleagues in a pub. FBT has not been paid on this legal fee. 8. The payment of annual leave was $35.750 during the year 2015/2016. 9. A provision of 5% is made on debts which are overdue for more than 30 days except for one debt which has been overdue for more than 12 months. A full provision has been made for this debt of $230,798. However, the receivables clerk failed to mail a legal claim to the client's correct address. 10. The company agreed to prepay promotion fees to the BBC Event Co for the service period 1 May 2016 to 30 April 2018. The payment of $220,000, net of 20% discount, was made on 15 April 2016. This amount has not been recorded in the income statement and balance sheet. a. The 11. Repairs and maintenance expense included the cost for the replacement of carpet in the factory meeting rooms with premier stone floor. This cost of $123,540 was paid on 1 April 2016. 12. The company has a franking account surplus of $8,000 on 1 July 2015. In addition, the company made the following transactions: company made a PAYG instalment payment of $40,500 on 21 July 2015. b. The company paid a PAYG instalment payment of $45,500 on 21 October 2015. C. On 1 November 2014, the company received a tax refund of $35,680 for the tax year 2014/15 d. On 31 December 2015, the company paid a fully franked interim dividend of $350,000 e. The company made a PAYG instalment payment of $55,500 on 21 January 2016. f. The company paid a PAYG instalment payment of $50,500 on 21 April 2016. g. On1 June 2016, the company received a dividend of $220,000. This had a franking percentage of 75%. h. On 30 June 2016, the company paid a fully franked final dividend of $450,000. Royal Watch Ltd Income Statement For the period 1 July 2015 to 30 June 2016 Revenue Gross sales (Less sales returns and allowances) Net Revenue $ 16,412,356 (15,860) 16,396,496 Cost of Goods Sold Beginning inventory Goods purchased or manufactured Total Goods Available (Less ending inventory) Cost of Goods Sold 1,862,792 9,580,365 11,443,157 (1,762,835) 9,680,322 Gross Profit (Loss) 6,716,174 41% Operating Expenses Wages Superannuation costs Depreciation on plant and machinery Depreciation on building Depreciation on leasehold improvements Electricity Insurance on factory premises Advertising and promotion expenses Freight and delivery expenses Total Operating Expenses 1,150,123 103,511 498,365 50,365 143,854 325,640 54,352 158,063 258,647 2,742,920 Gross Profit (Loss) After Operating Expenses 3,973,254 Other Income Interest income Bad debt recovery Net gain from disposal of plant and equipment Total Other income 8,672 58,600 36,872 104,144 Administrative Expenses Accounting and audit fees Bank charges Commissions Depreciation on office equipment Employee benefits Entertainment expenses Insurance Interest expense Legal and professional fees Maintenance and repairs Office supplies Payroll taxes Office rental Provision for annual leave Provision for doubtful debts Salaries Superannuation costs Travel Utilities Total Administrative Expenses 38,450 3,670 328,608 16,616 256,344 60,851 79,562 369,207 179,520 279,420 136,825 85,252 138,950 136,822 380,450 381,633 34,347 46,830 68,961 3,022,318 Net Income before Income Taxes (Less income tax expense) Net Income After Income Taxes 1,055,080 (316,524) 738,556 Royal Watch Ltd Tax Computation For the period 1 July 2015 to 30 June 2016 Operating Profit Operating Profit Total Operating Profit Add Back: Assessable income or deductions not allowed for tax purposes Total Add Backs Deductions: Allowable deductions or income not assessable for tax purposes Total Allowable Deductions TAXABLE INCOME Net Tax Payable Gross Tax (Less: Offsets) NET TAX PAYABLE 1. Royal Watch Ltd is a manufacturer and exporter of fashion watches and designer decorative clocks. Its activities have not changed during the tax year 2015/16. 2. For accounting purpose, the company uses the straight-line method to depreciate assets. For taxation purpose, it chooses to use the diminishing value method to depreciate its assets and chooses the option of self-assessment of the asset's effective life to calculate the lives of depreciating assets (Section 40-95 ITAA97). All assets are purchased post 10 May 2006 and the leasehold improvement is in relation to the leased office. The opening adjustable values are: Asset Plant and Machinery Leasehold improvement Office Equipment Effective Live 10 years 15 years 4 years Opening adjustable value $3,125,052 $1,635,988 $250, 635 3. The opening adjustable value of the plant and machinery disposed of during the year was $368,000 and the proceeds of $280,356 from the sale of these assets was received on 1 September 2015 4. The company purchased office equipment of $50,890 on 1 November 2015. 5. The company depreciates the factory premises over 40 years for both accounting and taxation purposes. The construction cost of the factory premises is $2,014,600 and the opening adjustable value is $ 1,611,680 6. Among the entertainment expenses, $38,450 was for food and drinks provided during five whole day in-house seminars attended by clients and employees. The balance was for lunches and dinners with customers. 7. Among the legal fees, the company incurred $68,300 legal fees in defending a lawsuit against its director, John who fought with the plaintiff during a Friday day drink with colleagues in a pub. FBT has not been paid on this legal fee. 8. The payment of annual leave was $35.750 during the year 2015/2016. 9. A provision of 5% is made on debts which are overdue for more than 30 days except for one debt which has been overdue for more than 12 months. A full provision has been made for this debt of $230,798. However, the receivables clerk failed to mail a legal claim to the client's correct address. 10. The company agreed to prepay promotion fees to the BBC Event Co for the service period 1 May 2016 to 30 April 2018. The payment of $220,000, net of 20% discount, was made on 15 April 2016. This amount has not been recorded in the income statement and balance sheet. a. The 11. Repairs and maintenance expense included the cost for the replacement of carpet in the factory meeting rooms with premier stone floor. This cost of $123,540 was paid on 1 April 2016. 12. The company has a franking account surplus of $8,000 on 1 July 2015. In addition, the company made the following transactions: company made a PAYG instalment payment of $40,500 on 21 July 2015. b. The company paid a PAYG instalment payment of $45,500 on 21 October 2015. C. On 1 November 2014, the company received a tax refund of $35,680 for the tax year 2014/15 d. On 31 December 2015, the company paid a fully franked interim dividend of $350,000 e. The company made a PAYG instalment payment of $55,500 on 21 January 2016. f. The company paid a PAYG instalment payment of $50,500 on 21 April 2016. g. On1 June 2016, the company received a dividend of $220,000. This had a franking percentage of 75%. h. On 30 June 2016, the company paid a fully franked final dividend of $450,000. Royal Watch Ltd Income Statement For the period 1 July 2015 to 30 June 2016 Revenue Gross sales (Less sales returns and allowances) Net Revenue $ 16,412,356 (15,860) 16,396,496 Cost of Goods Sold Beginning inventory Goods purchased or manufactured Total Goods Available (Less ending inventory) Cost of Goods Sold 1,862,792 9,580,365 11,443,157 (1,762,835) 9,680,322 Gross Profit (Loss) 6,716,174 41% Operating Expenses Wages Superannuation costs Depreciation on plant and machinery Depreciation on building Depreciation on leasehold improvements Electricity Insurance on factory premises Advertising and promotion expenses Freight and delivery expenses Total Operating Expenses 1,150,123 103,511 498,365 50,365 143,854 325,640 54,352 158,063 258,647 2,742,920 Gross Profit (Loss) After Operating Expenses 3,973,254 Other Income Interest income Bad debt recovery Net gain from disposal of plant and equipment Total Other income 8,672 58,600 36,872 104,144 Administrative Expenses Accounting and audit fees Bank charges Commissions Depreciation on office equipment Employee benefits Entertainment expenses Insurance Interest expense Legal and professional fees Maintenance and repairs Office supplies Payroll taxes Office rental Provision for annual leave Provision for doubtful debts Salaries Superannuation costs Travel Utilities Total Administrative Expenses 38,450 3,670 328,608 16,616 256,344 60,851 79,562 369,207 179,520 279,420 136,825 85,252 138,950 136,822 380,450 381,633 34,347 46,830 68,961 3,022,318 Net Income before Income Taxes (Less income tax expense) Net Income After Income Taxes 1,055,080 (316,524) 738,556 Royal Watch Ltd Tax Computation For the period 1 July 2015 to 30 June 2016 Operating Profit Operating Profit Total Operating Profit Add Back: Assessable income or deductions not allowed for tax purposes Total Add Backs Deductions: Allowable deductions or income not assessable for tax purposes Total Allowable Deductions TAXABLE INCOME Net Tax Payable Gross Tax (Less: Offsets) NET TAX PAYABLE