QUESTION ONE -
(a) Jane operates an Adelaide movie cinema and restaurant.
For the year ended 30 June 2017, which of the following amounts constitute assessable income and what amounts are deductible? Provide brief reasons.
The following transactions occurred during the 2016-17 tax year. All values exclude GST.
|
a) Sales of movie tickets, food and drink This does not include : $11,000 of accounts receivable outstanding from corporate customers that dined in the restaurant in June 2017
|
$1,208,000
|
|
b) Closing stock as at 30 June 2016 was $150,000 and the closing stock as at 30 June 2017 was $146,000 (cost) or $160,000 (market value).
|
|
|
c) She receives a bottle of French champagne from her landlord in recognition of their long standing business association. The market value of the champagne is $100.
|
$100
|
|
d) Received a once off payment from Heinz Foods for agreeing to solely use Heinz food products in the restaurant.
|
$5,500
|
|
e) Sells block of land on 1 July 2016 for $80,000. It was acquired in 1983 for a cost of $20,000 to build flats. The flats were not built however due to an inability to obtain of finance.
|
$80,000
|
|
f) She receives a $200 bereavement allowance form the government
|
$200
|
(b) For the year ended 30 June 2017, which of the following amounts constitute assessable income and what amounts are deductible? Provide brief reasons.
She made the following cash payments during the 2016-17 year. All values exclude GST.
|
1. movie hire, restaurant food and drink purchases
This does not include $11,000 accounts payable for movies hired in June 2017.
|
$522,000
|
|
2. Interest expenses for a bank loan made on 1 July 2016 used for working capital $20,000
The loan application fee for the new loan is $500 and the term of the loan was 2 years.
|
$20,500
|
|
3. Wages employees, power
|
$212,000
|
|
4. Legal expenses incurred in defending legal action taken by customers for food poisoning.
|
$7,700
|
|
5. Home rent - claim 1/5th of total rent of $15,000 for home office
|
$3,000
|
|
6. Donation to Other Recipients: the National Apology Foundation
|
$200
|
QUESTION TWO -
The opening balance as a 1 July 2016 in Jane's depreciation schedule are set out below. All items are used 100% for business use and the diminishing value method is used.
This asset was acquired in 2008.
|
|
Opening value $
|
|
Cinema carpet
|
10,000
|
Also, on 1 September 2016 the carpet was disposed for $2,000 and she acquired new carpet on the same date for $25,000. The installation cost for the new carpet was $2,000 and the costs of removing the old were $1,000.
Complete a depreciation schedule for the income year ended 30 June 2017. Show all workings.
QUESTION THREE -
Cherie is an architect based in Hobart. She acquired a second home for her own use as a holiday house in Sydney for $100,000. The purchase contract was dated 30 June 1987 and these costs were incurred on 30 June 1987. Other costs were stamp duty of $5,000 and the legal costs to purchase of $500, and these costs were incurred on 30 June 1987.
Her costs of running the house included: Interest $30,000, Repairs $3,000.
On 24 June 2001 she spent $10,000 on building a new second bathroom.
On 31 December 2016 she sold the house for a contract price of $500,000. She, however, only received $450,000 of the amount in cash. The balance owing was to be paid. The $50,000 though remained unpaid as at 30 June 2015 despite her best efforts to obtain payment. Her advertising costs on sale were $3,000 and the sales commission was $8,000.
After taking into account a capital loss of $10,000 from the previous tax year, calculate the net capital gain or loss for the year ended 30 June 2017.