Jimmy operated his own shoe design and manufacturing business from a warehouse in the CBD. Jimmy...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Jimmy operated his own shoe design and manufacturing business from a warehouse in the CBD. Jimmy purchased the warehouse on 1 July 2017 for $1.5 milion, it had been constructed in 2009 and the cost associated with construction was $500,000. He also offered weekend classes in shoe design to up and coming designers. Students signed up for a 20-week course which was paid in advance. Jimmy offered refunds to students who cancelled their courses. Income received was kept in a suspended income account. At the end of each month the value of classes run that month were removed from the suspended income account and accounted as income. While many students bring their own materials, Jimmy maintains a stock of cotton, fabric and accessories which he buys from a number of suppliers. They give his 30 days credit which he always uses. The stock is used very quickly so Jimmy treats them as consumables rather than trading stock. Jimmy's income and expenses for the current year are as follows: Receipts Sale of shoes Jimmy had issued invoices totalling $2,280,000 but at 30 June 2018 he had only received $2.245,000. He also received $5,000 which related to invoices from the previous year 2,250,000 Shoe design classes income. Cash received $60,000, of which $10,000 was for courses not yet taken 60,000 Compensation payment for loss of business profits when he broke his ankle trying out a new style of shoe and couldn't work 40,000 Interest on savings account 1,345 Dividends from Sparkles Galore Ltd 5,890 (franking credits attached to the dividend were $1289) Unfranked Dividend from High Heels Pty Ltd 2,000 Jimmy is a member of the army reserves and received wages for his duties undertaken for the year 10,000 Expenses Wages for staff 890,000 Membership of Shoe Designers Association 650 Payment to his sister for taking his place at the sewing classes whilst he was on holiday. If he had paid a casual from an employment agency it would have cost $2000 but he wanted to help.out his sister and paid her Purchase of materials for use in the classes. 10,500 a bit more. 3500 On 15 June 2018 Jimmy bought $1,500 of new materials for which he had not yet paid. Superannuation for employees 9.5% of gross wages Purchases of stock for use in manufacturing shoes 965,000 Personal superannuation 25,000 Doxcleaning, of army reserve uniform 200 Jimmy took out a loan on 1 September 2017 to help with the purchase of some new plant and equipment. He borrowed $27,300 of which $17,300 went towards Purchase of uniforms for himself and his staff the purchase of new plant and the rest he used as spending money on his holiday. The repayments were due on the 1st day of each month starting as from 1 October 2017 of $1500 consisting of $1300 capital and $200 interest. That was branded with the shops logo 5,800 Motor vehicle expenses for Jimmy his records showed 80% business use 25,000 13,500 Parking fines incurred whilst attending client premises 300 The costs associated with obtaining the loan were $400 and the loan was for 3 years Jimmy often took some work home with him and incurred the following expenses, he estimated that he spent around 30% of him time working from home Home electricity On 30 June 2018 Jimmy prepaid the loan repayments for the next 12 months 1 July 2018 to 30 June 2019 18,000 1,200 Home insurance 700 Payment to his accountant for completing his income tax returns Home Rates and taxes 1,400 4,300 Donation to Red Cross 500 Advice from his legal advisor on the benefits of changing his structure from its current mode of a sole trader to a company Annual Shoe Designers Conference in Paris 350 1,500 Travel expense to attend the conference included Plant and equipment_(see note 4) Airfares 5,000 3.000 Accommodation Notes: Taxis Meals 350 1,000 500 1. In the previous year Jimmy had incurred a loss of $29,000 after a deduction of $12,000 for superannuation for himself and a donation to World Vision $2,000. Sightseeing eg, Eiffel Tower 2. Jimmy has paid $57,000 in PAYG instalments against his business income for the financial year ended 30 June 2018 3. Opening stock was valued at $150,000 and the closing stock as at 30 June 2018 was based on several methods a) Cost $165,000 b) Market $175,000 c) Base Value $145,000. Jimmy wished to minimise his profits on the business 4. Jimmy was depreciating plant and equipment as per below and during the year additional plant was purchased and existing plant sold or scrapped. Plant on hand Cost $ 4,600 1,000 10,000 6,000 7,000 Item Office Furniture OAV at 1.7.2017 1,500 700 Rate 10% diminishing value 40% diminishing value 20% diminishing value 20% diminishing value 20% prime cost Computer Sewing Machine A Coffee Machine 8,000 4,000 5,000 Plant A Purchases Effective life 4 years 5 years 6 years Purchase date Price $ 3,500 5,800 8,000 Item Plant B 1.10.2017 Plant C 16.1.2018 Sewing Machine B 5.5.2018 Sales Item Plant A Sale price $ 7,500 4,000 Sale date 1.10.2017 Sewing Machine A 5.5.2018 1. Jimmy sold off some of his assets during the financial year so he could buy the warehouse for his business. A) Sale of vacant land on 28 May 2018 The land had been bought on 28 October 1984 at a cost of $95,000. Stamp duty of $2,358 was paid at purchase. Rates and taxes of $15000 were paid during ownership. He paid $10,000 to the agent for the sale of the land and $1299 in settlement fees, these were both paid on 28 May 2018. The land had been bought by Jimmy with the intention of building a factory for his business. 290,000 B) Sale of shares in public company on 23 September 2017 The shares had been bought on 3 March 2017 for $48,000 Brokerage on purchase and sale was 1% payable at the 55,000 time of the transaction. C) Sale of holiday house on 12 August 2017 The house had been purchased on 22 November 2005 for $290,000. He had paid interest during his period of ownership which totalled $40,000. Stamp Duty of $6,320 had been paid at purchase. At purchase He arranged to have a new kitchen fitted at a cost of $23,000. This was paid on 15 January 2006. During the period of ownership He had a dispute with his neighbour over the boundary of the property and on 1 March 2011 He paid his lawyer $2,500 for resolving the dispute. 400,000 Jimmy had a previous capital loss of $15,000 from the sale of shares in 2017. Required: Calculate Jimmy's taxable income and his net tax payable including Medicare Levy for the year ended 30 June 2018. Please provide reasons for any exclusion of items from your answer. Jimmy operated his own shoe design and manufacturing business from a warehouse in the CBD. Jimmy purchased the warehouse on 1 July 2017 for $1.5 milion, it had been constructed in 2009 and the cost associated with construction was $500,000. He also offered weekend classes in shoe design to up and coming designers. Students signed up for a 20-week course which was paid in advance. Jimmy offered refunds to students who cancelled their courses. Income received was kept in a suspended income account. At the end of each month the value of classes run that month were removed from the suspended income account and accounted as income. While many students bring their own materials, Jimmy maintains a stock of cotton, fabric and accessories which he buys from a number of suppliers. They give his 30 days credit which he always uses. The stock is used very quickly so Jimmy treats them as consumables rather than trading stock. Jimmy's income and expenses for the current year are as follows: Receipts Sale of shoes Jimmy had issued invoices totalling $2,280,000 but at 30 June 2018 he had only received $2.245,000. He also received $5,000 which related to invoices from the previous year 2,250,000 Shoe design classes income. Cash received $60,000, of which $10,000 was for courses not yet taken 60,000 Compensation payment for loss of business profits when he broke his ankle trying out a new style of shoe and couldn't work 40,000 Interest on savings account 1,345 Dividends from Sparkles Galore Ltd 5,890 (franking credits attached to the dividend were $1289) Unfranked Dividend from High Heels Pty Ltd 2,000 Jimmy is a member of the army reserves and received wages for his duties undertaken for the year 10,000 Expenses Wages for staff 890,000 Membership of Shoe Designers Association 650 Payment to his sister for taking his place at the sewing classes whilst he was on holiday. If he had paid a casual from an employment agency it would have cost $2000 but he wanted to help.out his sister and paid her Purchase of materials for use in the classes. 10,500 a bit more. 3500 On 15 June 2018 Jimmy bought $1,500 of new materials for which he had not yet paid. Superannuation for employees 9.5% of gross wages Purchases of stock for use in manufacturing shoes 965,000 Personal superannuation 25,000 Doxcleaning, of army reserve uniform 200 Jimmy took out a loan on 1 September 2017 to help with the purchase of some new plant and equipment. He borrowed $27,300 of which $17,300 went towards Purchase of uniforms for himself and his staff the purchase of new plant and the rest he used as spending money on his holiday. The repayments were due on the 1st day of each month starting as from 1 October 2017 of $1500 consisting of $1300 capital and $200 interest. That was branded with the shops logo 5,800 Motor vehicle expenses for Jimmy his records showed 80% business use 25,000 13,500 Parking fines incurred whilst attending client premises 300 The costs associated with obtaining the loan were $400 and the loan was for 3 years Jimmy often took some work home with him and incurred the following expenses, he estimated that he spent around 30% of him time working from home Home electricity On 30 June 2018 Jimmy prepaid the loan repayments for the next 12 months 1 July 2018 to 30 June 2019 18,000 1,200 Home insurance 700 Payment to his accountant for completing his income tax returns Home Rates and taxes 1,400 4,300 Donation to Red Cross 500 Advice from his legal advisor on the benefits of changing his structure from its current mode of a sole trader to a company Annual Shoe Designers Conference in Paris 350 1,500 Travel expense to attend the conference included Plant and equipment_(see note 4) Airfares 5,000 3.000 Accommodation Notes: Taxis Meals 350 1,000 500 1. In the previous year Jimmy had incurred a loss of $29,000 after a deduction of $12,000 for superannuation for himself and a donation to World Vision $2,000. Sightseeing eg, Eiffel Tower 2. Jimmy has paid $57,000 in PAYG instalments against his business income for the financial year ended 30 June 2018 3. Opening stock was valued at $150,000 and the closing stock as at 30 June 2018 was based on several methods a) Cost $165,000 b) Market $175,000 c) Base Value $145,000. Jimmy wished to minimise his profits on the business 4. Jimmy was depreciating plant and equipment as per below and during the year additional plant was purchased and existing plant sold or scrapped. Plant on hand Cost $ 4,600 1,000 10,000 6,000 7,000 Item Office Furniture OAV at 1.7.2017 1,500 700 Rate 10% diminishing value 40% diminishing value 20% diminishing value 20% diminishing value 20% prime cost Computer Sewing Machine A Coffee Machine 8,000 4,000 5,000 Plant A Purchases Effective life 4 years 5 years 6 years Purchase date Price $ 3,500 5,800 8,000 Item Plant B 1.10.2017 Plant C 16.1.2018 Sewing Machine B 5.5.2018 Sales Item Plant A Sale price $ 7,500 4,000 Sale date 1.10.2017 Sewing Machine A 5.5.2018 1. Jimmy sold off some of his assets during the financial year so he could buy the warehouse for his business. A) Sale of vacant land on 28 May 2018 The land had been bought on 28 October 1984 at a cost of $95,000. Stamp duty of $2,358 was paid at purchase. Rates and taxes of $15000 were paid during ownership. He paid $10,000 to the agent for the sale of the land and $1299 in settlement fees, these were both paid on 28 May 2018. The land had been bought by Jimmy with the intention of building a factory for his business. 290,000 B) Sale of shares in public company on 23 September 2017 The shares had been bought on 3 March 2017 for $48,000 Brokerage on purchase and sale was 1% payable at the 55,000 time of the transaction. C) Sale of holiday house on 12 August 2017 The house had been purchased on 22 November 2005 for $290,000. He had paid interest during his period of ownership which totalled $40,000. Stamp Duty of $6,320 had been paid at purchase. At purchase He arranged to have a new kitchen fitted at a cost of $23,000. This was paid on 15 January 2006. During the period of ownership He had a dispute with his neighbour over the boundary of the property and on 1 March 2011 He paid his lawyer $2,500 for resolving the dispute. 400,000 Jimmy had a previous capital loss of $15,000 from the sale of shares in 2017. Required: Calculate Jimmy's taxable income and his net tax payable including Medicare Levy for the year ended 30 June 2018. Please provide reasons for any exclusion of items from your answer.
Expert Answer:
Answer rating: 100% (QA)
Calculating the cost of sales By default the Profit and Loss Report estimates gross profit without taking into account inventory opening and closing Gross profit equals sales minus transactions If you ... View the full answer
Related Book For
Accounting
ISBN: 978-1118608227
9th edition
Authors: Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett
Posted Date:
Students also viewed these accounting questions
-
Question Jimmy operated his own shoe design and manufacturing business from a warehouse in the CBD. Jimmy purchased the warehouse on 1 July 2017 for $1.5 million, it had been constructed in 2009 and...
-
Jimmy purchased the warehouse on 1 July 2017 for $1.5 million, it had been constructed in 2009 and the cost associated with construction was $500,000. Question: Under div 43, how do we calculate the...
-
A firm has consistently adjusted its allowance account at the end of the fiscal year by adding a fixed percent of the periods net sales on account. After five years, the balance in Allowance for...
-
The CEO of Amazon, has publicly questioned the advisability of granting patents for business processes such as his companys 1-Click ordering process. Do such patents put a chilling effect on the...
-
Show that the function f(x):= 1/x2 is uniformly continuous on A: = (1, ), but that it is not uniformly continuous on B: = (0, ).
-
Using the 2019 corporate tax rate: a. What are the tax liability, the marginal tax rate, and the average tax rate for a corporation with $248,300 taxable income? b. What are the tax liability, the...
-
Given that \(f(x)=\frac{k}{2^{x}}\) is a probability distribution for a random variable that can take on the values \(x=\) \(0,1,2,3\), and 4 , find \(k\).
-
The following is the unadjusted trial balance for Rainbow Lodge Ltd. at its year end, May 31, 2015. The company adjusts its accounts monthly. Additional information: 1. An annual insurance policy was...
-
Using the Internet, find an advertisement or other promotion that resulted in miscommunication. Describe what caused the miscommunication and how the business handled it.
-
On December 31, Y3, Aylmer Industries Inc. purchased 85% of the outstanding shares of Belmont Inc. The purchase price is indicated on the excel file. The entry has been recorded on the books of...
-
The directors of Cliff-Hang Inc. has been critical of the product costing methods whereby factory overhead is charged to products on a factory-wide overhead rate. The chief accountant suggested a...
-
Describe the kinds of evidence that need to be gathered to document the parties standard of living during the marriage when significant assets are involved.
-
Identify the general rule governing modifications of alimony awards.
-
Currently, you have RM60,000 (Malaysian ringgit) that you would like to invest for 2 years and are considering buying a Malaysian government security maturing in 1 year that pays 4 percent annually....
-
Identify a minimum of three events that commonly result in the termination of an alimony obligation.
-
Define income. Identify three types of income that are usually not considered income in the child support context.
-
Diffie-Hellman Key Exchange Alice and Bob are trying to generate a symmetric key for them. They chose p = 5 (a public prime) and g = 3 (a public integer). Alice generated a random number A = 8 What...
-
Why is homeostasis defined as the "relative constancy of the internal environments? Does negative feedback or positive feedback tend to promote homeostasis?
-
The following information relates to Nevertire Ltd. Profit before income tax for the year ended 30 June 2016 was $220 000. The following items were used in determining that profit: Sales Cost of...
-
Month-end balance sheet amounts for the legal practice of Adam Booth, a local lawyer, for 3consecutive months of 2016 are shown below. The information is complete except for the balance in the...
-
Francine Steele and Shaun Dunn formed a partnership on 1 July 2015. Some of Steeles business assets and liabilities were assumed by the partnership, and these are listed below at both carrying...
-
Make an energy diagram for gas B in Figure 20.4. Figure 20.4 When gases of different temperatures are placed in thermal contact, energy is transferred thermally from the hotter to the cooler gas...
-
Suppose you were to play the two film clips shown in Figure 20.7 backward. Would the resulting processes be possible? Figure 20.7 Quasistatic versus non-quasistatic expansion of a cylin- der...
-
(a) What are the SI units of \(Q\) ? (b) For the process depicted in Figure 20.2a, make an energy diagram for each of these systems: (i) water, pot, and flame; (ii) pot and flame; (iii) pot. Figure...
Study smarter with the SolutionInn App