DEPARTMENT OF ACCOUNTING AND CORPORATE GOVERNANCEACCG8124 Taxation Law Session 1 2020
On 1 July 2019, Ben and Maggie took over directly the whole shareholding in BM Fine Jewellery Pty Ltd. The company operates a jewellery shop in Southland shopping centre. They acquired this business by paying the previous owner cash of $400,000. This constitutes $300,000 for the shop while the balance of the consideration is for the Goodwill on acquisition.
Details for the year ending 30 June 2020 are:
|Proceeds from disposal of land||300,000|
|Loan establishment cost||3,000|
|Purchase of Hyundai station wagon||28,000|
|New equipment (computers, shelving and security system)||37,500|
|Travel (Jewellery fair)||4,500|
|Entertainment – client||2,450|
|Market research expenses||21,250|
Market selling value$65,000
$1,800 of the wages are owing to staff
Car expenses: Hyundai station wagon, acquired on 1 May 2020:
Running costs(excluding depreciation)$6,500
The effective life of the car is five years and that it is only used for the business purposes.
On 1 March 2020, Maggie attended a jewellery fair in Hong Kong in order to update her knowledge on the latest jewellery designs and customer trends. The travel costs were $4,500. This amount covered the expenditure for airfare, accommodation and registration.
Acquired the following new equipment:
1 September 2019: Computer$10,500
15 October 2019: Shelving$24,500
1 January 2020: Security system$2,500
8 June 2020 Air conditioning (unpaid as at 30 June 2020)$25,000
Loan establishment costs and interest expenses
On 1 August 2019, the company obtained a 10-year loan of $500,000 to fund business operations.
Goodwill of $100,000 was written off.
Market research expenses of $21,250 were incurred in examining the feasibility of opening a new store in Sydney CBD.
Assuming Ben and Maggie want to maximise taxable income,
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