AYB 339: Accountancy Capstone - Income Tax Note - Accounting and Finance Assignment Help

Assignment Task:

Task:

Question 1 (12 marks)
You are currently preparing the income tax note for inclusion in the 2020 financial statements of Totalconcept Pty Ltd, a small proprietary company, which is considered to be a reporting entity.
Note that the 2020 tax balances in the financial statements (particularly the DTA and DTL balances) have not been updated from the previous year.

Question 1 (Cont.)
Additional Information:
(i) Unearned rental income of $15,000 shown as a current liability in the Balance Sheet relates to non-refundable rental income received in advance from tenants.
(ii) The tax written down value of the plant and equipment at 30 June 2019 was $245,000. Tax depreciation for the year ended 30 June 2020 was $67,000. The tax written down value of the plant and equipment at 30 June 2020 was therefore $178,000.
(iii) The tax written down value of the building at 30 June 2019 was $75,000. Tax depreciation of the building for the year ended 30 June 2020 was $10,000. The tax written down value of the building at 30 June 2020 was therefore $65,000.
(iv) The prepayments shown in the Balance Sheet relates to the payment for business licences and registrations required by Government regulations. As such, they are fully deductible under Section 82KZM of the ITAA (1936) when initially paid.
(v) The company uses the “actual method” to value meal entertainment fringe benefits. The entertainment of $12,000 shown in the Income Statement relates exclusively to client lunches and dinners. No entertainment was provided to employees.
(vi) Warranties are claimed as an allowable deduction under Section 8-1 of the ITAA (1997) when paid.
(vii) Assume that the company has not paid any PAYG instalments to the Australian Taxation Office during the 2020 income year.
(viii) Ignore the effects of GST. Assume that the company has correctly recorded (and reconciled the GST in its financial statements).
(ix) The company tax rate is 27.5% as the company has a turnover of less than $50 million in respect of the year ended 30 June 2020.
 

Question 2 (8 Marks)
Maximus Holdings Pty Ltd (ACN: 091 782 071) is an Australian resident proprietary company. The company has an annual turnover of $34 million. The company was incorporated with ASIC on 13 January 2011. The company has 100 fully paid ordinary shares x $1.00 each totalling $100. The 100 shares are held by the following four shareholders:
- Adrian Gardiner 25 shares
- Joanne Howard 25 shares
- Phil Hocken 25 shares
- Louise McMillan 25 shares

The four shareholders are also the four directors of the company. Adrian is the managing director and is also the company secretary of the company.

You are the external accountant and tax agent for Maximus Holdings Pty Ltd. On 3 March 2020, you receive a phone call from Adrian advising that the four shareholders have just finished a meeting and are contemplating changing the name of the company from Maximus Holdings Pty Ltd to Gigantor Holdings Pty Ltd. They seek your advice.

Question 3 (10 Marks)
You have been presented with an extract of the management accounts (and in particular, the Balance Sheet) of Wine World Pty Ltd as at 30 June 2020.

Wine World Pty Ltd is a wholesaler/distributor of Australian wines. It is based in Brisbane and buys Australian wines from wine producers, based in the Hunter Valley (in New South Wales) and the Margaret River (in Western Australia) and on-sells these wines to bottle shop retailers in Queensland. It has recently started selling some wine to a Japanese-based bottle shop located in Tokyo

The company is a large proprietary company and is considered a reporting entity. The company was incorporated on 9 May 2010. The company is in the process of preparing its external financial statements for the year ended 30 June 2020.
The company tax rate of 30% applies to Wine World Pty Ltd.

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