Hot Pink Batts Pty Ltd manufactures pink batts. The company wishes to use all available small business concessions to minimise taxable income. Hot Pink Batts Pty Ltd has prepared the following Profit & Loss Statement for the 2019 financial year:

	$	$
Gross Sales		2,400,000
Less Cost of Goods Sold
Opening Stock	33,000
Purchases and Manufacturing Costs	1,250,000
	1,283,000
Closing Stock	-300,000	983,000
Gross Profit		1,417,000
Add Other Income
Diesel Fuel Rebate (Government Subsidy)	3,500
Dividend from American Company – Note 1	8,000
Interest Income	2,000	13,500
		1,430,500
Expenses
Gross Wages	680,000
Superannuation	62,000
Provisions for Customer Warranty Claims – Note 2	30,000
Truck Expenses	31,000
Accounting Depreciation – Note 3	60,000
Share of Loss from Partnership with Al Insulation Pty Ltd	13,000
Tax Related Expenditure – Note 4	24,000
Other Deductible Expenses	400,000	1,300,000
NET PROFIT BEFORE INCOME TAX		130,500

NOTE 1

Hot Pink Batts Pty Ltd owns shares in an American company. The $8,000 dividend received from this investment is net of $4,000 tax withheld by USA government.

NOTE 2

The amount of warranty expenses paid to customers during the 2019 income year was

$11,000.

NOTE 3

Decline in Value for tax purposes needs to be determined using the following information:

General SBE Pool Balance at 30 June2018 $90,000 Purchase of New Machine on 1December2018 $98,000 Purchase of New Computer on 1February2019 $900

NOTE 4

Tax related expenditure is comprised of the following:

Payroll Tax	$ 7,000
Tax Agent Fees	$ 6,000
ATO Penalties	$ 4,000
ATO General Interest Charge	$ 7,000

NOTE 5

$50,000 of PAYG tax instalments were paid for the 2018/19 income year.

REQUIRED:

Using the templates provided:

1. Prepare a statement reconciling net profit with taxable income

2. Calculate the net tax payable by the company for the year, clearly showing all your workings

Answer rating: 100% (QA)

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