Manic Pty Ltd: Tax Treatment- Get Taxation Case Study Assignment Help at info@tvassignmenthelp.com

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Taxation Case Study Assignment:

Task: For further information or query regarding any academic assistance, visit www.myassignmentbank.com. You can also contact us by calling +61 2 8294 2025 or by sending an email to info@myassignmentbank.com. The case study requires students to prepare a memo, applying the taxation laws to arrive at conclusions and/or recommendations on the tax  treatment of various transactions. In addition, students are to prepare a tax reconciliation in the attached spreadsheet and calculate taxable income and tax payable. Finally, students are to discuss an ethical aspect of taxation. Manic Pty Ltd (“Manic”) is an Australian resident company that leases and sells scaffolding and charges service fees to customers in Australia and New Zealand. Annual turnover for Manic for the last 5 years has ranged between $4 million and $5.5 million. Manic is in the process of finalizing its income tax return for the year ended 30 June 2018 and you have been asked to review the following notes to the profit and loss: 1. An amount of $80,000, received in the form of service fees, was not included in accounting profit in the year ended 30 June 2018 as it was believed the client still had a right to demand a refund from Manic should the service not be provided. 2. Interest of $10,000 had accrued but had not yet been debited to Manic’s bank account as at 30 June 2018. No amount had been recognized in accounting profit. 3. Trading stock to the value of $50,000 was purchased from a Hong Kong based supplier and remained on a ship in the Pacific Ocean as at 30 June 2018. Manic had not yet received the bill of lading but had claimed the expense of $50,000 in cost of trading stock in accounting expense. 4. A provision for doubtful debts of $30,000 was expensed during the year. As at 30 June 2018 the Managing Director could not decide whether to write off any debts as bad. 5. Manic engaged the services of a company to research the viability of Manic entering into a new market. Currently Manic leases and sells scaffolding but is considering investing in the business of supply and installation of cement blocks. Manic paid the research company $25,000 for their report. 6. On 1 June 2018 the warehouse was flooded due to a leaking ceiling. Manic decided to replace the metal roof with tiles. The tiles cost $50,000 whilst it would have cost $30,000 for a new metal roof. An expense $50,000 was claimed in calculating accounting profit. 7. Manic borrowed $1.5 million to fund the purchase of a new factory in 2017 (cost $1.5 million plus costs of acquisition $28,000) that it planned to use for a new business venture. The business venture did not go ahead yet interest on the loan totalled $10,300 for 30 June 2018 and was treated as an accounting expense. The factory was sold for $2,100,000 on 30 June 2018 and costs of disposal totalled $36,000. The net amount included accounting profit was $536,000 ($2,100,000 – ($1,500,000 + 28,000 + 36,000). 8. Manic sold 100,000 shares in Franks Pty Ltd to an unrelated company on 1 April 2018 for $3.50 per share. The shares were originally acquired by Manic on 2 June 2009 for $2.20 per share from a wholly owned subsidiary of Manic, whilst the shares had been independently valued at $1.50 a share on that day. The net amount included in accounting profit was $130,000 ($350,000 - $220,000). ***This information provided by www.myassignmentbank.com is made available for general reference purpose only. No material should be used, changed, updated or disseminated at any time by any third party without the express and written permission from My Uni Paper.*** 9. The 2017 income tax work papers indicate that Manic has carry- forward capital losses in accordance with the CGT provisions of the ITAA 1997 of $35,000. 10. Depreciation expense totals $120,000 however the depreciation deductible in accordance with the ITAA 1997 is $112,000 for 30 June 2018. 11. Entertainment expense totals $65,000 including $32,500 relating to employees on which Fringe Benefits Tax has been paid. The balance relates to client entertainment 12. Included in expenses is an amount paid by Manic to prevent a former Marketing Manager setting up a similar business in the next 5 years ie a restrictive covenant. Manic paid $54,000 for this restrictive covenant on 1 April 2018 that would operate for the 5 year period. REQUIRED 1. a) Prepare a memo to Manic’s Chief Financial Officer (CFO) explaining the income tax treatment with respect to each of the above items including references to sections, cases and income tax rulings where relevant. 2. b) Calculate Manic’s taxable income and income tax payable for 30 June 2018 assuming the net accounting profit before taxes is $620,500 and adjusting for differences between accounting and tax. You are to use the attached excel spreadsheet to complete your tax reconciliation/calculate tax payable. Manic paid company tax installments (PAYG payments) for the year ended 30 June 2018 totalling $102,500