Please see the document 1 and document 2 that i have iploaded .. Essay Example

Income-Tax Returns

Income statement

For the year ended 30th June 2010

Sales revenue

Cash sales

Credit sales

19,800-14850

Sales revenue

Cost of sales

Cash purchases

Credit purchases

6,930-4,950

Total Purchases

Add: opening stock

Goods available

Less: closing stock (LIFO)

Cost of sales

Gross profit

Operating expenses

Staff wages

Superannuation (staff)

Legal expenses

Interest expense

Parking fine

Parking fee

Motor -vehicle expenses

25%*8,400

Other deductible- expenses

Total operating expense

Operating income

Add: interest income

Bad-debt recovered

Insurance proceeds

Total operating income

Non operating

Interest income (with wife)

dividends

Total non-operating

Net income (Minimum Taxable income)

Stock is valued according to the “International Accounting Standards” which requires Stock to be valued at the ‘lower of cost’ and ‘net realizable value’ (Black, 2003).

2a) Allowable deductions for David

Allowable deduction with respect to depreciation

Car – road assistance vehicle

(35,000/8)*2

Diagnostic machine

(1,200/5)*2

Battery testing machine

Office furniture

Plasma TV for the staff lunch room

(2,300/5)*2

Add: depreciation from low value pool

New concrete driveway

(15,000/8)*2

Security and monitoring – CCTV cameras

Depreciation on building

Maximum allowable deductions for David

Since all the assets were acquired after 10 May 2006, the depreciation has been determined as: (adjustable value/effective life)*2.0

2b) closing balance for the low value pool

Opening Balance at 1 July 2009

Add: printer – 30 Nov 2009

Bench tools — 1 July 2009

Computer — 1 July 2009

Total additions

Total amount in the low value pool

Less: depreciation

37.5%*4,570

Closing balance at 30 June 2010

Since in the income year there are allocations of low cost assets to the “low value pool”, you use a diminishing-value rate of 18.75% to account for the corresponding depreciation expense (Donald, et al., 2009). Computer and bench tools have also been allocated to the “low value pool” since they have declined in value below $1,000 from other methods of depreciation apart from the prime cost method.

References

Black, G., (2003). Students’ Guide to Accounting and Financial Reporting Standards. London: Financial Times Prentice Hall.

Donald, E., et al., (2009). Intermediate Accounting. New Jersey: John Wiley and Sons.