Bread Basket Pty Ltd was equally owned by Daley Bread and Whyte Bread, two brothers. On...
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Bread Basket Pty Ltd was equally owned by Daley Bread and Whyte Bread, two brothers. On I July CY the brothers had bought out their two sisters who had owned the other 50% of the company. The company operated 3 bakeries which sold bread and pastries. In addition to sales over the counter the bakeries ran accounts for a number of restaurants. Accounts were sent out after the end of each month and were usually paid within a fortnight. The company had a net profit for the year of $250,000 after the following income and expenses were taken into account: Income Cash received This included $22,000 which was outstanding from the previous year. Outstanding accounts for the current year were $35,000. Dividends received: 25 August CY Franking credits attached - $5,000 15 April CY Franking credits attached - $6,429 National Bread Delivery Pty Ltd Expenses Accounting fees Bank fees Flour Manufacturers Pty Ltd Donations to Red Cross and Amnesty Australia Interest. Interest on business loans totalled $1,500 per month and were paid monthly until I March CY when 6 months interest was prepaid. Legal expenses: Retainer Lease of factory premises Borrowing expenses for 6 year loan taken out on 30 November CY. Interest on this loan was capitalized so there were no loan repayments in the current year for this loan. Provision for annual leave and long service leave Purchase of materials 930,000 20,000 15,000 32,000 4,900 15,000 21,000 5,000 500 800 60,000 350,000 Travelling expenses: Daley Bread traveled to a Small Business Conference in Sydney. His wife traveled with him and attended some of the social functions organised by the conference organisers. Daley's costs were 70% of the total expenses paid by the company. The remainder related to his wife. Wages to staff Superannuation for staff Notes: Actual leave taken by staff was $93,000. Purchase of new office on 1 June CY for $340,000. The building had been constructed on 1 April 2003 at a cost of $100,000. Write off of bad debt of $2,800 on 15 June CY. The debt arose from sales to a restaurant in the previous year. The restaurant had gone out of business and there was going to be no return to unsecured creditors. 5,100 500,000 45,000 The following PAYG (Instalments) or refunds received were paid or received during the year: $ 28 July CY 28 October CY 30 November CY 28 February CY 28 April CY 28 July FY 4th instalment of PY tax 1st instalment of CY tax refund of PY tax 2nd instalment of CY tax 3rd instalment of CY tax 4th instalment of CY tax 3,200 15,800 840 14,200 16,800 23,000 The company paid two dividends during the year. The first totalled $35,000 and was franked to 100%. It was paid on 1 July CY. The second dividend was paid on 1 December CY. The dividend totalled $60,000 and was franked to 30%. The balance in the franking account at 30 June PY was a debit of $2,000 which was paid on 28 July CY. Required: Using the reconciliation method, calculate the taxable income and the net tax payable of the company for the year ended 30 June CY assuming the company wished to minimise it's taxable income but did not wish to use pooling for depreciation purposes and did not wish to use SBE elections. Treat them as a non BRE Set out the franking account for the company for the current year including any franking additional tax or franking deficit tax which may be payable. Question 2 The Carmichael Family Trust commenced in 1990 when it was settled by a family friend. The trust has a number of investments and also operates a business. The trustees had employed a full-time manager who managed the business and one full-time staff member. The income and deductions for the current year are as follows: Income Dividends from a number of companies Franking credits attached to these dividends Unfranked dividends Business income Interest Sale of a factory building which had been rented out. The building had been sold on 1 July CY. Commission on sale was $7,500. It had been bought on 1 July 5 years previously for $230,000. It had been constructed on 1 August 1995 for $190,000. The trust completely repainted and rewired the property at a cost of $15,000 immediately after purchase. Stamp duty on purchase was $5,200. (Do not calculate the Division 43 deduction for the one day of ownership in the CY). Expenses General operating expenses of the business Provision for annual leave Salary to Summer Carmichael, one of the beneficiaries who didn't receive any distributions from the trust but worked in the business during her university holidays Notes 150,000 90,000 110,000 280,000 36,000 The net income of the trust was distributed as follows: 250,000 210,000 15,000 30,000 Leave taken by the Manager and the staff member was $20,000. On 10 November PY the Manager had launched a takeover of a business. The takeover attempt cost $22,000 but was unsuccessful. Capital gains to an associated family company. The company also received dividends from other companies. These totalled $30,000 with franking credits of $10,000. All the franked dividends to Jenny MacNeil. Jenny also her own business from which had net business loss of $60,000. $730 of the unfranked dividends to Sam Ferguson (15 years old). Sam also has $3,000 interest from a bank account started by his grandparents the day he was born and $28,000 from the deceased estate of his great aunt. The trustee of the great aunt's deceased estate had paid tax of $1,722 on this income. Brian Baird (17 years old) is entitled to the interest which is to be accumulated until he turns 18 years of age. If he should die before turning 18 the accumulated funds will be donated to a charity selected by the settlor in the trust deed. In the current year the trustee spent $25,000 buying Brian a car when he turned 17. Brian also earned $10,000 from his part-time job and $14,000 interest from funds left to him when his great aunt died some years ago. Any remaining income was retained by the trustee. Required: Calculate the Division 6E net income of the trust, set out income excluded from the Division 6E net income, calculate the taxable income (if any) of each beneficiary and the net tax payable by each beneficiary or the trustee. Explain and state the section numbers under which the Trust income will be assessed. Bread Basket Pty Ltd was equally owned by Daley Bread and Whyte Bread, two brothers. On I July CY the brothers had bought out their two sisters who had owned the other 50% of the company. The company operated 3 bakeries which sold bread and pastries. In addition to sales over the counter the bakeries ran accounts for a number of restaurants. Accounts were sent out after the end of each month and were usually paid within a fortnight. The company had a net profit for the year of $250,000 after the following income and expenses were taken into account: Income Cash received This included $22,000 which was outstanding from the previous year. Outstanding accounts for the current year were $35,000. Dividends received: 25 August CY Franking credits attached - $5,000 15 April CY Franking credits attached - $6,429 National Bread Delivery Pty Ltd Expenses Accounting fees Bank fees Flour Manufacturers Pty Ltd Donations to Red Cross and Amnesty Australia Interest. Interest on business loans totalled $1,500 per month and were paid monthly until I March CY when 6 months interest was prepaid. Legal expenses: Retainer Lease of factory premises Borrowing expenses for 6 year loan taken out on 30 November CY. Interest on this loan was capitalized so there were no loan repayments in the current year for this loan. Provision for annual leave and long service leave Purchase of materials 930,000 20,000 15,000 32,000 4,900 15,000 21,000 5,000 500 800 60,000 350,000 Travelling expenses: Daley Bread traveled to a Small Business Conference in Sydney. His wife traveled with him and attended some of the social functions organised by the conference organisers. Daley's costs were 70% of the total expenses paid by the company. The remainder related to his wife. Wages to staff Superannuation for staff Notes: Actual leave taken by staff was $93,000. Purchase of new office on 1 June CY for $340,000. The building had been constructed on 1 April 2003 at a cost of $100,000. Write off of bad debt of $2,800 on 15 June CY. The debt arose from sales to a restaurant in the previous year. The restaurant had gone out of business and there was going to be no return to unsecured creditors. 5,100 500,000 45,000 The following PAYG (Instalments) or refunds received were paid or received during the year: $ 28 July CY 28 October CY 30 November CY 28 February CY 28 April CY 28 July FY 4th instalment of PY tax 1st instalment of CY tax refund of PY tax 2nd instalment of CY tax 3rd instalment of CY tax 4th instalment of CY tax 3,200 15,800 840 14,200 16,800 23,000 The company paid two dividends during the year. The first totalled $35,000 and was franked to 100%. It was paid on 1 July CY. The second dividend was paid on 1 December CY. The dividend totalled $60,000 and was franked to 30%. The balance in the franking account at 30 June PY was a debit of $2,000 which was paid on 28 July CY. Required: Using the reconciliation method, calculate the taxable income and the net tax payable of the company for the year ended 30 June CY assuming the company wished to minimise it's taxable income but did not wish to use pooling for depreciation purposes and did not wish to use SBE elections. Treat them as a non BRE Set out the franking account for the company for the current year including any franking additional tax or franking deficit tax which may be payable. Question 2 The Carmichael Family Trust commenced in 1990 when it was settled by a family friend. The trust has a number of investments and also operates a business. The trustees had employed a full-time manager who managed the business and one full-time staff member. The income and deductions for the current year are as follows: Income Dividends from a number of companies Franking credits attached to these dividends Unfranked dividends Business income Interest Sale of a factory building which had been rented out. The building had been sold on 1 July CY. Commission on sale was $7,500. It had been bought on 1 July 5 years previously for $230,000. It had been constructed on 1 August 1995 for $190,000. The trust completely repainted and rewired the property at a cost of $15,000 immediately after purchase. Stamp duty on purchase was $5,200. (Do not calculate the Division 43 deduction for the one day of ownership in the CY). Expenses General operating expenses of the business Provision for annual leave Salary to Summer Carmichael, one of the beneficiaries who didn't receive any distributions from the trust but worked in the business during her university holidays Notes 150,000 90,000 110,000 280,000 36,000 The net income of the trust was distributed as follows: 250,000 210,000 15,000 30,000 Leave taken by the Manager and the staff member was $20,000. On 10 November PY the Manager had launched a takeover of a business. The takeover attempt cost $22,000 but was unsuccessful. Capital gains to an associated family company. The company also received dividends from other companies. These totalled $30,000 with franking credits of $10,000. All the franked dividends to Jenny MacNeil. Jenny also her own business from which had net business loss of $60,000. $730 of the unfranked dividends to Sam Ferguson (15 years old). Sam also has $3,000 interest from a bank account started by his grandparents the day he was born and $28,000 from the deceased estate of his great aunt. The trustee of the great aunt's deceased estate had paid tax of $1,722 on this income. Brian Baird (17 years old) is entitled to the interest which is to be accumulated until he turns 18 years of age. If he should die before turning 18 the accumulated funds will be donated to a charity selected by the settlor in the trust deed. In the current year the trustee spent $25,000 buying Brian a car when he turned 17. Brian also earned $10,000 from his part-time job and $14,000 interest from funds left to him when his great aunt died some years ago. Any remaining income was retained by the trustee. Required: Calculate the Division 6E net income of the trust, set out income excluded from the Division 6E net income, calculate the taxable income (if any) of each beneficiary and the net tax payable by each beneficiary or the trustee. Explain and state the section numbers under which the Trust income will be assessed.
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Financial Accounting Tools for business decision making
ISBN: 978-0470534779
6th Edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso
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