Exam 9: Tax Accounting and Trading Stock

Which of the following items would not be trading stock under s70-10? (i) Land held by a property developer (ii) Confidential documents held by a research company (iii) Computer software that is produced or developed for sale by a software manufacturer or developer

Top Class Products Ltd manufactures conveyor belts for use in factories. The company knows there are some impending liability claims due to a batch of defective conveyor belts that were made a couple of years ago. These claims have not yet been brought to court. The company's accountant, nevertheless, has shown in the company's 2020 financial statements, a contingent liability of $10 million (shown as product liability claims) based on what the accountant estimates is likely to be a settlement sum to settle these outstanding claims. For tax purposes is the $10 million contingent liability for product liability claims an allowable tax deduction?

Western Hardware Store uses a periodic inventory system and provides the following information about their trading stock. Opening stock $12,000 Purchases $57,000 Closing stock (cost) $9,000 Of the $9,000 of closing stock, $2,000 is past its "use-by" date and must be destroyed. What is the allowable deduction for the purchases and adjustments of trading stock that Western Hardware Store is entitled to for the year ended 30 June 2020? Learning objective: 9.6 apply the rules for determining the assessability/deductibility of trading stock under both the periodic and perpetual inventory systems

A large firm of accountants carries on business in partnership. The records of the business show: Accounts Receivable 1 July $ 200,000 Cash received from clients during the year $1,500,000 Estimated value of work in progress as at 30 June $ 80,000 Accounts Receivable 30 June $ 300,000 What is the gross income derived by the partnership for the year ended 30 June?

Local Motors Pty Ltd is a small business entity and a manufacturer of engine motors for use in mining machinery. To help secure a lease of some valuable business premises, on 1 June 2020, Local Motors Pty Ltd decided to prepay 12-months rent in advance at a cost of $36,000. The lease commenced on the 1 June 2020. What is Local Motors Pty Ltd's deduction in respect of prepaid rent for the year ended 30 June 2020?

Luciano is concerned about his taxable income for the year and so he directs that his employer not pay him his next salary payment, due on 29 June 2020, and instead have that payment go direct to the local council and be shown as being paid on Luciano's behalf. The employer reluctantly agrees to do so. What is the tax effect of this arrangement for the year ended 30 June 2020?

Ian wants to know what his assessable income will be for the year ended 30 June 2020. He advises you of the following: · Rent received of $22,000 · Accrued Rent Receivable of $420 · Interest received of $2,300 · Accrued interest of $860 · Unfranked dividend of $2,000. This unfranked dividend was not actually paid to Ian but was instead reinvested into a dividend reinvestment plan and resulted in Ian receiving 10 additional shares in the company.

BVD Construction Pty Ltd is in the process of working out its closing stock as at 30 June 2020. The company has advised that the value of stock physically on hand (at cost) id $840,000 but that the company has some outstanding orders on their way from overseas by ship. $55,000 worth of stock (at cost) is currently onboard ships and is all under the trade term FOB (Free on Board). There is also $20,000 worth of stock that has not yet left the port of departure due to issues with customs and government clearance. Advise BVD Construction Pty Ltd what the value of the company's closing stock on hand is as at 30 June 2020.

THC Paint Pty Ltd is a company that sells paint and other painting supplies to the public. A stock take at 30 June 2020 revealed there were 200 cans of a particular paint still unsold. Some of these cans of paint cost $10 when they were originally ordered (at the start of the tax year) and a few most likely were in the most recent shipment that had been received and which had a cost price of $14 each (due to some extra customs costs that had to be paid). The current replacement cost is $12 a can and the cans have a current market value of $22. Of these values per can of paint, which is not able to be used for tax purposes?

You are provided with the following information on the accounts receivable of Chester Ltd for the year ended 30 June 2020. What will be the assessable income from trading for Chester Ltd? Opening trade debtors$40,000 Cash received$200,000 Closing trade debtors

Roger is a sole trader who sells various electrical items such as flat screen UHD television sets. Roger decides to take one flat screen UHD television set from his store for his own personal use. The television set cost $1,500 and retails for$3,000. The current replacement cost of this same make and model set is $1,800. What amount does Roger need to show into his business income for the stock taken for his own use?

Owen has recently purchased shares in a big Bank but has not yet advised his bank details and so on the 29th June 2020 he received a cheque representing a dividend. Owen did not bank this cheque until 3 July 2020. He does not know when he received the cheque as he collected his mail on the 28^th June 2020 but did not open it until the 29^th June. Owen kept a copy of the dividend statement which indicated that the dividend was paid by the company on the 18^th of June 2020. What is the correct date that Owen 'derived' this dividend?

Which of the following statements is true?

Which of the following methods would not be considered a valid basis for valuing trading stock

How should ABC Manufacturing Pty Ltd treat its provision for annual and long service leave entitlements in its tax records?

A and B Car Detailers is a small business entity and has advised you that it has paid the following in the year ended 30 June 2020: · $40,000 in workers compensation insurance premiums for the next 12 months until 30 June 2021 · $80,000 prepaid 2021 wages · $900 in advertising expenses for a campaign to in July 2020 How much, if any, of these prepaid expenses can the business claim in the year ended 30 June 2020?

ABC Tuition Services Pty Ltd provides private paid tuition services to secondary school students. The company offers a discount to encourage prepayment and students always pay for their tuition in advance. The tuition contracts expressly provide that no refunds are available in respect of the prepaid tuition services. When monies are received from students, ABC's bookkeeper debits the 'cash at bank' account and credits the 'unearned income' current liability account as per generally accepted accounting principles. How should ABC Tuition Services Pty Ltd treat these monies received in advance for tax purposes?

Which of the following statements is true about the periodic inventory system?

Bob's Signwriting Pty Ltd is a small business entity and has just paid $240,000, which represents the next 24 months of liability insurance to cover the business until 30 April 2022. How much of this prepaid expense can Bob's Signwriting Pty Ltd claim in the year ended 30 June 2020?

You are provided with the following information on the accounts receivable of Don Lawlor, a self employed solicitor, who has only one employee who is, employed as a receptionist, for the year ended 30 June 2020. What will be the assessable income for Don Lawlor? Accounts receivable balance as at 1 July 2019 $25,000 Cash received from clients $180,000 Accounts receivable balance as at 30 June 2020 20,000 Which of the following statements is true?