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LEGL602 : Taxation Law - Bloomingdale Florists Pty. Ltd - Matchstick Ltd - Fifo Method - Taxation Law Assignment Help
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Internal Code : 1AJHFC
The actual long service leave paid in cash during the year was $10,000.
The bad debts written off during the year were $15,000.
The repairs of $15,000 consisted of painting the company premises for$5,000 and replacing the rotting wooden office windows with new steel windows for $10,000.
The Gifts were as follows: $
Royal Sydney Hospital 10,000
Paramatta Eels League Club $10,000
Capital allowances for tax purposes amount to $10,000.
For accounting purposes the company values its closing stock using the LIFO Method.
The Opening stock value for tax purposes was $50,000.
The FIFO Method however produces the following results for stock value at the end of the year: $ Cost Price 52,000 Replacement Price 53,000 Market Selling Value 54,000
The company borrowed money from the bank to acquire the new depreciating assets. The loan was for 3 years and was taken out on 1 July 2017. The total borrowing costs of $3,000 were claimed as an accounting expense.
The company had outstanding trade debts from retail sales of $20,000 on 30 June 2018. These were included in the sales figure in the Profit and Loss Statement.
For the year ending 30 June 2018, the company received the following dividends which are not included in the profit and loss statement:
Dividend from an Australian Resident company (80% franked) $9,000
Dividend from an Australian Resident company (100% franked) $5,000
Dividend from a Foreign Resident company (No tax withheld) $1,000
The Tax Commissioner has made a ruling regarding the Director’s salaries and considers $40,000 to be a reasonable salary.
Prior years’ income losses:
The company has $20,000 unabsorbed income losses from the year ending 30 June2017. The shareholding of the company has not changed since that time. However in July 2016 the company acquired a market research company.
TASK2
On 16 September 1982 Matchstick Ltd acquired 50 hectares of rural land in Toowoomba. At the time the land was zoned agricultural, but the directors were awarethat in the future that the land could be rezoned to permit subdivision and that therewere rumours that the government was considering building a highway to connect thearea with Brisbane. The directors of the company stated that the land was acquired for
the business of growing trees and retention as a long-term investment and not forresale at a profit. The trees on the land were to be grown and sold to match stickmanufacturers.
The growing and sale of wood proved to be very successful and in 2005 the companypurchased another 40 hectares of land adjacent to the original 50 hectares. Unfortunately, the demand for the company’s wood began to diminish due to the decline in the number of people smoking and concerns about the environment. In August 2017, Strike a Light Pty Ltd, one of the manufacturers to whom Matchstick Ltd supplied wood, paid Matchstick Ltd $1,000,000 in exchange for Matchstick Ltd’s agreement to terminate the contract. This contract represented 80% of Matchstick Ltd’s sales of wood to all suppliers.
In November 2017, at the next annual general meeting, the shareholders of MatchstickLtd decided that the tree growing business was no longer sufficiently profitable to justifythe company’s continued involvement in that business. At the same time, the land had become available for development, as the zoning rules had changed to permitsubdivision. The directors of Matchstick Ltd therefore decided to take the necessarysteps to have the land rezoned for leasing the subdivided land to agricultural andindustrial tenants on long-term leases. Consequently,the Directors decided tosubdivide the land, install water and electricity and set aside land for a small shopping
centre. After completing these activities in February 2018, the directors changed theirmind and instead of leasing the land they sold all the land and by June 2018 had realised a profit of $10,000,000.
Taxation Law Assignment Law
TASK1 Bloomingdale Florists Pty. Ltd. is an Australian Retail Company which operates a florist shop in Sydney. It is an Australian Resident Private Company for Tax Purposes. It is also a Small Business Entity for tax purposes. The Accounting Profit and Loss Statement for the year ended 30 June 2018 is as follows:
The actual long service leave paid in cash during the year was $10,000.
The bad debts written off during the year were $15,000.
The repairs of $15,000 consisted of painting the company premises for$5,000 and replacing the rotting wooden office windows with new steel windows for $10,000.
The Gifts were as follows: $
Royal Sydney Hospital 10,000
Paramatta Eels League Club $10,000
Capital allowances for tax purposes amount to $10,000.
For accounting purposes the company values its closing stock using the LIFO Method.
The Opening stock value for tax purposes was $50,000.
The FIFO Method however produces the following results for stock value at the end of the year: $ Cost Price 52,000 Replacement Price 53,000 Market Selling Value 54,000
The company borrowed money from the bank to acquire the new depreciating assets. The loan was for 3 years and was taken out on 1 July 2017. The total borrowing costs of $3,000 were claimed as an accounting expense.
The company had outstanding trade debts from retail sales of $20,000 on 30 June 2018. These were included in the sales figure in the Profit and Loss Statement.
For the year ending 30 June 2018, the company received the following dividends which are not included in the profit and loss statement:
Dividend from an Australian Resident company (80% franked) $9,000
Dividend from an Australian Resident company (100% franked) $5,000
Dividend from a Foreign Resident company (No tax withheld) $1,000
The Tax Commissioner has made a ruling regarding the Director’s salaries and considers $40,000 to be a reasonable salary.
Prior years’ income losses:
The company has $20,000 unabsorbed income losses from the year ending 30 June2017. The shareholding of the company has not changed since that time. However in July 2016 the company acquired a market research company.
TASK2
On 16 September 1982 Matchstick Ltd acquired 50 hectares of rural land in Toowoomba. At the time the land was zoned agricultural, but the directors were awarethat in the future that the land could be rezoned to permit subdivision and that therewere rumours that the government was considering building a highway to connect thearea with Brisbane. The directors of the company stated that the land was acquired for
the business of growing trees and retention as a long-term investment and not forresale at a profit. The trees on the land were to be grown and sold to match stickmanufacturers.
The growing and sale of wood proved to be very successful and in 2005 the companypurchased another 40 hectares of land adjacent to the original 50 hectares. Unfortunately, the demand for the company’s wood began to diminish due to the decline in the number of people smoking and concerns about the environment. In August 2017, Strike a Light Pty Ltd, one of the manufacturers to whom Matchstick Ltd supplied wood, paid Matchstick Ltd $1,000,000 in exchange for Matchstick Ltd’s agreement to terminate the contract. This contract represented 80% of Matchstick Ltd’s sales of wood to all suppliers.
In November 2017, at the next annual general meeting, the shareholders of MatchstickLtd decided that the tree growing business was no longer sufficiently profitable to justifythe company’s continued involvement in that business. At the same time, the land had become available for development, as the zoning rules had changed to permitsubdivision. The directors of Matchstick Ltd therefore decided to take the necessarysteps to have the land rezoned for leasing the subdivided land to agricultural andindustrial tenants on long-term leases. Consequently,the Directors decided tosubdivide the land, install water and electricity and set aside land for a small shopping
centre. After completing these activities in February 2018, the directors changed theirmind and instead of leasing the land they sold all the land and by June 2018 had realised a profit of $10,000,000.