Noosa Ltd manufactures quality surf clothing. In the 2023 financial year, it reports a profit before tax of $500 000 and an income tax expense of $190 000.

REQUIRED

Consider each of the following items of information, and determine their appropriate treatment in the period’s statement of profit or loss and other comprehensive income. You can assume that each of the items is independent of the others.

a. As of 1 July 2022, the tax rate increases, resulting in an additional expense to Noosa Ltd of $5000.

b. During recent years, Noosa Ltd has been developing a long-life wet-suit. The project has been in development for the past five years, with total related expenditure of $400 000 being capitalised as at 30 June 2023. In June 2023 the wet-suits are finally tested. The results are not favourable. 

The wet-suits act like sponges, absorbing a great deal of water and a number of the people testing the garments are drowned. It is decided to abandon the development of the new wet-suits.

c. On 1 July 2023 an agreement is signed to sell a division of Noosa Ltd to another organisation. 

The sale will generate a profit of $300 000. The sale should be finalised before the completion of the 2023 financial statements (financial statements will generally not be completed until two or three months after year end).

d. Given the influx of tourists into the Noosa area, there has been additional demand for surf clothing in 2023. This has caused wages to increase from $80 000 in 2022 to $170 000 in 2023.

e. In 2023 Noosa Ltd sells goods to England and South Africa. The sales to South Africa are denominated in South African currency. A crash in the value of the South African currency results in a foreign exchange loss of $20 000.