Thursday, 27 August 2015

Sample exam question 6 - August 2015

Go Explore is the name of a popular retailer, supplying camping, fishing and outdoor equipment.

Go Explore is the trading name of Go Explore Pty Ltd which is a private company, incorporated in Australia.

Go Explore is seeking to expand and will be meeting with potential financiers in the near future.  As a result, it wants to maximise its taxable income as part of a broader picture of showing the best results it can.

You have a discussion with the CFO (who has no real idea about stock valuation for tax purposes) and that discussion involves talking with the CFO about the different methods of stock valuation available for income tax purposes.  You do not talk about obsolescence as you know (and have confirmed) it not an issue for Go Explore as they keep fairly low stock levels and the stock turnover is generally good.

The CFO advises that whilst some stock lines actually cost more than their market or replacement values, some cost significantly less.  The following information was provided to you:

Stock line
Units on Hand
Cost per Unit
Market Selling Value per Unit
Replacement Value per Unit
Kids Neon Blue Fishing Rod
400
$10
$15
$10
Self-inflating mattress
650
$60
$55
$58
Super warm sleeping bags
500
$70
$73
$75

You are not sure about the logic of the replacement value of the sleeping bags being higher than the market selling value but the CFO advises that it is soothing to do with the “super cold snap happening down south” which means that the suppliers have put up their price”.  90% of sales by Go Explore are from Brisbane and they cannot sell these super warm sleeping bags at high prices.

Go Explore has lots of other stock lines as well but wants to value these at cost as it does not have details on the other values.  The value of the closing stock (not including the stock lines detailed above) at cost totals $680,000.

All stock for the current year has been valued at cost for accounting purposes and in the prior year ‘cost’ was also used for both accounting and tax numbers.  Prior year closing stock was costed at $610,000.

Other results for the current year were:

Sales
$3,600,000
Purchases
$2,800,000
Operating Costs
$400,000

Go Explore is registered for GST and all amounts above are GST exclusive.
Required

a) What did your discussion with the CFO about the different methods of stock valuation involve? What were the key points you made?    (4 marks)

b) Calculate the taxable income of Go Explore Pty Ltd for the current year assuming that they wish to maximise their taxable income.  Show all workings.    (7 marks)

Click here to view the answers.

23 comments:

  1. best budget bluetooth headphones are the best for running, sports & other activities. Find Sony in-ear earphones & enjoy superb sound. The best wireless earbuds fit comfortably, have great sound quality, and battery life. ... audio jacks and going Bluetooth-only

    ReplyDelete
  2. Best gaming keyboard: the top keyboards in 2020 · The best mechanical keyboard for gaming. The SteelSeries fleet of best gaming keyboards include RGB aluminum frame keyboards

    ReplyDelete
  3. Best laptops identified by Which? computing experts. Only the very best laptop with the most power that are easy to use with a long battery life and great screen. It is hands down the Best Laptops that come in every shape and size, perfect for relaxing and watching videos after a heavy workload.

    ReplyDelete
  4. choose a wireless gaming mouse? · The Top 5: · Logitech G Pro X Superlight wireless gaming mouse· Razer Viper Ultimate · Wireless gaming mouse with built-in rechargeable battery and illuminated top cover.

    ReplyDelete
  5. Before We plunge into the genuine PC proposals, let me give you the base and ideal details you ought to go for in this spending range. what is onboard nic

    ReplyDelete
  6. Finding the right gaming mouse in the midst of the relative multitude of choices accessible can be a battle. There are a ton of variables to consider, similar to what it looks like, how it feels in the hand, the catch determination and game plan, the nature of its sensor, and whether you need a mouse that is remote or wired. best claw grip gaming mouse

    ReplyDelete
  7. It's anything but a short time to become acquainted with the intricate details of another espresso producer. Each dribble espresso producer we test blends approximately 65 cups when our specialists are through with it, and fermenting is only one of numerous perspectives we assess. best toaster

    ReplyDelete
  8. In addition to writing articles, we offer a number of additional scientific services. Your writer can also provide assistance with rewriting, proofreading, and editing. Do not forget about it, go to the original site and we will make you a cool essay!

    ReplyDelete
  9. We are a domiciliary consideration office. Our point is to give care and backing administrations to our customers which surpass administrative consideration necessities and that are best in class. emergency electrician

    ReplyDelete
  10. Obligation at hand is an activity game that has a wide scope of fun chasing after the world. The plot of this activity-based game is identified with the battle of Stalingrad against German powers where players kill a huge number and zombies to rank, open weapons, characters, and get more elevated levels. www.apkvow.com

    ReplyDelete
  11. Children, young people, experience darlings, and nearly everybody appreciates rides of hoverboards. These two-wheeled mechanized individual methods for transport are the most favored present by the children and grown-ups the same. However, while making a buy, one needs to consider a great deal numerous things. best affordable hoverboard for teenager

    ReplyDelete
  12. Put more information on your website like this one, I really like these types of blogs
    China load haul dump

    ReplyDelete
  13. I am very much pleased with the contents you have mentioned. I wanted to thank you for this great article. apfs install

    ReplyDelete
  14. Reading books can help improve your critical thinking skills. You can get different recommendations on Booklisto.com

    ReplyDelete
  15. Thank you for sharing this informative piece. Please check this for me Religion & Spirituality

    ReplyDelete
  16. Your knowledge has been a great help. Can you verify this for me Video Calls & Chatting

    ReplyDelete
  17. "Navigating an acquisition" offers brief yet thorough insights into the difficult process of business acquisitions. The book expertly navigates readers through the difficulties of mergers and acquisitions, offering vital techniques and practical recommendations. With straightforward explanations and real-world examples, it is a must-have resource for executives, entrepreneurs, and business transaction experts. Whether you're a seasoned dealmaker or a rookie in the business, this book will provide you with the knowledge and resources you need to successfully traverse each stage of the acquisition process. A must-read for anybody looking to learn and master the art of corporate mergers and acquisitions.
    traffic lawyer henrico va

    ReplyDelete