Calculate the tax liabilities of crowne ltd

Assignment Help Financial Management
Reference no: EM131276320 , Length: word count:2500

Part -1:

LO 1 Understand the regulatory framework for financial reporting

1.1 Describe the different users of financial statements and their needs
1.2 Explain the legal and regulatory influences on financial statements
1.3 Assess the implications for users
1.4 Explain how different policies are dealt with by accounting and reporting standards

LO 2 Be able to prepare financial statements from complete or incomplete records

LO 3

3.1 Explain how the information needs of different user groups vary
3.2 Prepare financial statements in a form suitable for publication by a sole trader, partnership and limited company

Assignment Brief

Purpose of this assignment

The manner in which items and transactions are treated and presented in the financial statements may affect an investor's perception of the position and performance of the business. Whilst individual accounting standards can be developed to deal with specific issues it is also important that there is a framework that sets out the wider purposes that accounting standards are intended to achieve. This assignment will help you understand the importance of accounting regulations, the importance of accounting information to different user groups with varied needs and the need to present financial statements in standardized formats

Task 1 - LO1 & 3 - Assessment Criteria 1.1 & 3.1

Describe the different users of financial statements and their needs. Explain how the information needs of different user groups vary

The objective of financial reporting is to provide information about the reporting entity that is useful for certain group of people who need to know that information. The regulatory framework does not only prevent preparers of financial statements from misleading users; but is also developed to ensure that the information in the financial statements actually does meet users' needs.

To achieve pass you must;

- List out and describe the different users of financial statements
- Identify different components of financial statements to be prepared by the company
- Explain how the information needs of different user group vary

To achieve M1, you will make effective judgements by comparing different users of financial statements as to how they use those information for decision making by linking to various financial statements prepared by the company

To achieve D3, you should show convergent and lateral thinking on how different user groups use the financial statement for decision making. You should illustrate conflicting interest of different user groups in using the financial statement for decision making. Also describe why do businesses need to produce financial statements and why company has to follow accounting procedures in order to produce financial information

Task 2 - LO1 - Assessment Criteria 1.2 (M3, D2):

Explain the legal and regulatory influences on financial statements

The preparation of financial statements of Limited Liability Companies is closely regulated. The regulation comes from three main sources: Company Law, Accounting standards and Stock exchange listing requirements.

Explain clearly the regulatory framework relating to Company Legislation, Accounting standards and other sources of regulations.

To achieve pass you must;

- Identify legal and regulatory influences.
- Explain how legal and regulatory aspects influence the content and the form of the financial statements.

To achieve M3, you have to explain a range of legal and regulatory influence including the regulation for stock exchange listing. Also explain both International and Local Accounting Standards.

To achieve D2, you will have to demonstrate autonomy and independence by bringing more information like how company legislation is linked to Accounting standards for detailed accounting guidance.

Task 3 - LO4 - Assessment Criteria 1.3 (M3,D1):

Assess the implications for users.

The general objective of financial reporting is to provide useful information to the users of Financial statements. Therefore, the Framework for the Preparation and Presentation of Financial Statements requires financial statements to be prepared on the basis that they comply with certain accounting concepts, underlying assumptions and (qualitative) characteristics".

Identify four accounting concepts/assumptions/qualitative characteristics and assess the implication of each of the above concepts/assumptions/qualitative characteristic on the users of financial statements

To achieve pass you must;

- Identify four accounting concepts/assumptions/qualitative characteristics.
- Explain each of the concepts/assumptions/Qualitative characteristics, which you have selected for users of financial statement and Assess the implication of the above for the users.

To achieve M3 you will have to use a coherent and logical approach assessing the implication for the users of financial statement.

To achieve D1, you have to make conclusions through synthesis of ideas and have been justified when assessing the implication of each accounting concepts/assumptions/qualitative characteristics. You should explain the fundamental and enhancing qualitative characteristics and link how enhancing characteristics strengthen the fundamental characteristics.

Task 4 - LO1 - Assessment Criteria 1.4 (M2,D1):

Explain how different policies are dealt with by accounting and reporting standards.

The accounting policies are the specific policies and procedures that are used by a company to prepare its financial statements.

Describe with examples, how different policies are dealt with by accounting and reporting standards referring to Inventory (IAS 2) and Depreciation (IAS 16)

To achieve pass you must;

- Explain the relevant accounting standards pertaining to depreciation and inventory
- Explain the importance of the concept of consistency in valuation of inventory and methods of depreciation though accounting standards.

To achieve M2 you will have to use range of information to explain the importance of consistency in accounting policy.

To achieve D1 your answer should reflect a critical evaluation on when a firm can change its accounting policy and validate your conclusion.

Task 5 - LO2 - Assessment Criteria 2.3 (M1,M3):

Prepare a consolidated balance sheet and profit and loss account for a simple group of companies

The Statement of Financial Position (SFP) of D Ltd. and Z Ltd. are as under: Statement of Financial Position as on December 31, 2015

Non current Assets:

D Ltd

$

Z Ltd

$

Plant and Equipment

70000

16000

Land and Buildings

15000

2000

Investment (80% shares in Z Ltd)

60000

 

Current assets:

 

 

Inventory

90000

40000

Trade and other Receivables

50000

24000

Cash at Bank

20000

20000

Total Assets

305000

102000

Liabilities

Equity share capital of R.O.1 each

65000

20000

Share premium

35000

10000

Retained Earnings

70000

25000

 

 

 

Secured loans

45000

20000

Current Liabilities:

 

 

Trade and other Payables

60000

20000

Accrual and other Liabilities

30000

7000

Total Equity and Liabilities

305000

102000

The following additional information is provided:

D Ltd acquired an 80% holding in Z Ltd on January 1, 2015. On that day the balances of retained earnings of Z Ltd stood at $12,500. D Ltd‘s accounts show $5,000 owing to Z Ltd; Z Ltd's accounts show $5,000 owed by D Ltd. No impairment of goodwill has occurred to date.

You are required to prepare the consolidated Statement of Financial Position of D Ltd as on 31st December 2015.

(B) On 1 January 2015 P acquired 60% of the ordinary shares of S. At the time of acquisition the Retained earnings of S stood at $20,000.

The following statement of Profit and Loss Account have been produced by P and S for the year ended 31 December 2015.

 

P

$

S

$

Sales

630,000

260,000

Cost of Sales

(210,000)

(105,000)

Gross Profit

420,000

155,000

Distribution Cost

(90,000)

(30,000)

Administration expenses

(60,000)

(45,000)

Profit from Operations

270,000

80,000

Investment income from S

18,000

-

Profit before taxation

288,000

80,000

Tax

(65,000)

(13,000)

Profit after Taxation

223000

67,000

During the year ended 31 December 2015 P had sold $42,000 worth of goods to S. These goods had cost P $28,000. On 31 December 2015 S still had half of these goods in Inventories. Goodwill impairment for the year is $2,000.

On 31 December 2015, both P and S revalued their Freehold land, resulting in a revaluation surplus of $8,000 and $5,000 respectively.

Calculate Group revenue, Cost of sales and prepare a Consolidated Income statement for the year ended 31 December 2015

Explain why consolidated financial statements are useful to the users of financial statements (as opposed to just the parent company's separate (entity) financial statements. (Provide Reference to IAS and IFRS wherever applicable)

To achieve pass you must

- Show the Group structure, calculation of Goodwill, NCI, and Group reserve and prepare the consolidated balance sheet of D Ltd as on 31 December 2015.
- Calculate the group revenue, Cost of sales and prepare the consolidated

Comprehensive Income statement for the year ended 31 December 2015.

To achieve M1 you have to make an effective judgment on application of relevant IAS and IFRS.

To achieve M3, you should use an appropriate structure as specified by IAS/IFRS in preparing the consolidated balance sheet. You should demonstrate the interdependence on Non- Controlling Interest, Goodwill and retained earning calculation. You have to solve the problem accurately and balance the consolidated SOFP.

Task 6 - LO3 - Assessment Criteria 3.2 (M1,M3):

Prepare financial statements in a form suitable for publication by a sole trader, partnership and limited company

The following trial balance was extracted from the books of B Ltd at 31 December 2015.

 

Dr

$

Cr

$

Share Capital:

 

 

60,000 shares of $ 1 each

 

60,000

Inventory in trade (Opening)

23,428

 

8% Loan Notes

 

20,000

General Reserve

 

10,000

Land (at Cost)

59,600

 

Plant and Machinery(at Cost)

13,000

 

Bad Debts

601

 

Wages and Salaries

29,820

 

Purchases

90,620

 

Sales

 

196,748

Allowance for Bad Debts

 

850

Accumulated Depreciation:

 

 

Plant & Machinery

 

750

Insurance

693

 

Office Expenses

4,142

 

Balance at Bank

29,544

 

Rates

2,010

 

Profit and Loss Account ( Opening)

 

3,900

Trade Receivables

16,923

 

Trade Payables

 

12,989

Rent Received

 

2,390

Directors Remuneration

26,000

 

General Expenses

11,246

 

 

 

307,627

 

307,627

You are given the following information:

1. Inventory in trade as on 31 December 2015 amounted to $6,426.

2. Bad debts to be written off are $2,700.

The provision for bad debts is to be allowed at 5% of Trade

Receivables.

3. Rent receivable due at 31 December, 2015 amounted to $ 130.

4. Insurance paid in advance at 31 December 2015 amounted to $ 86.

5. Depreciation on Plant and Machinery is to be provided for at the rate of 20% p.a. reducing balance method.

7. The outstanding Loan Notes interest is to be provided.

8. $ 7,000 is to be transferred to General Reserve.

9. Provision is to made for dividend at 20% on the issued capital.

10. Provide tax @ 20%.

11. The allocation of expenditure between distribution and administration expenses is as follows:

 

 

Distribution

Administration

 

Cost of sales

Expense

Expense

Wages and Salaries

100%

 

 

Rates

 

 

100%

General Expenses

 

 

100%

Directors Remuneration

 

 

100%

Office Expenses

 

 

100%

Bad Debts

 

100%

 

Insurance

 

 

100%

Depreciation - Plant and Machinery

100%

 

 

You are required to prepare:

a) A Income Statement for the year ended 31 December 2015

b) A statement of Financial Position (Balance Sheet) as at 31 December 2015 (in compliance with IAS1)

To achieve pass you must

Show the steps in calculating depreciation, provision for doubtful debts.

Prepare the income statement and the statement of financial position.

To achieve M1, you should use an effective judgment while making adjustments in the financial statements.

To achieve M3, you should use an appropriate structure specified by IAS/IFRS in preparing
the SOFP and the income statement. You should validate the result by balancing the SOFP. You will have to solve the problem accurately and balance the SOFP by applying creative thinking

Task 1 Recognize different financial statements and Understanding on different uses of accounting information and why they use those information.

Task 2 Able to explain legal and regulatory influences

Task 3 Assess the implication of Accounting concepts/assumptions/qualitative characteristic on the users of financial statements

Task 4 Explanation on how different policies are dealt referring to IAS 16 and 2

Task 5 Prepare consolidated Income statement and SOFP

Task 6 Prepare financial statement for publication.

LO1
1.1 Describe the different users of financial statements and their needs
1.2 Explain the legal and regulatory influences on financial statements
1.3 Assess the implications for users
1.4 Explain how different policies are dealt with by accounting and reporting standards
LO2
2.3 Prepare a consolidated balance sheet and profit and loss account for a simple group of companies
LO3
3.1 Explain how the information needs of different user groups vary
3.2 Prepare financial statements in a form suitable for publication by a sole trader, partnership and limited company

Part -2:

LO1  Understand the duties and responsibilities of the tax practitioner in the UK tax environment

1.1 Describe the UK tax environment

1.2 Analyse the role and responsibilities of the tax practitioner

1.3 explain the tax obligation of tax payers or their agents and the implications of non- compliance

LO3

Be able to calculate corporation tax liabilities for companies

3.1 calculate chargeable profits

3.2 Calculate the tax liabilities and due payment date

3.3 Explain how income tax deductions are dealt with.

Assignment Brief

Purpose of this assignment

Understand the UK Tax environment and the duties and responsibilities of the tax practitioner. Students should also know about corporation tax liability of relevant entities. The knowledge gained should help the student in Self-Assessment and also help in filing returns for their company.

LO -1- Understand the duties and responsibilities of the tax practitioner in UK tax environment

"Scenario ‘A' Covers LO 1.1, L O 1.2 and LO 1.3

The Finance Budget 2016-17 was a budget which was looked upon with great expectation .It was a budget which investors were looking for. Simple Co is one of the leading, established tax practitioners of the city and you are one of the partners of Simple Co. Simple Co has captured the market reputation by its independent ethical policies , excellent tax planning guidance and loyalty to its clients.

You have been approached by various clients both new and old to brief them about the UK Tax Environment and the stringent policies of non -adherence.

Task 1 (LO1- AC 1.1 ) Describe the UK tax environment P, M3,D2

Required:-

As a tax practicing expert, you are required to describe in detail the UK tax environment to your clients, so that they get an overall picture of the operating system which will help your clients to get an idea about the UK Tax environment.

To achieve P, you are required to explain the meaning of taxation, types of taxation, methods of tax collection and tax legislation of UK.

To achieve M3, you should have used an appropriate structure and approach in presenting the types of taxation in UK, and put your findings in a tabular form or in a flow chart with proper explanation.

To achieve D2, you should have demonstrated autonomy and independence in describing the overall taxation system in your own way of presentation by doing an independent search. You should have met the deadline to submit the tasks to achieve the unit assessment criteria by taking responsibility in managing and organising activities.

Task 2 (LO1- AC 1.2 ) Analyse the role and responsibilities of the tax practitioner P,M3

Required:-

As a partner of a Simple Co., knowledge your clients the role and responsibilities of the tax practitioner towards their clients and HMRC.

To achieve P, you are required to explain how the tax payer deals with HMRC explaining his role and responsibilities as a tax practitioner.

To achieve M3, you should have used a range of source of information in the assignment relating to the above task.

1.3 Task 3 (LO1- AC 1.3 ) Explain the tax obligation of tax payers or their agents and the implications of non-compliance P,M2

Required:-
To bring to the knowledge of your clients, the tax obligation of tax payers or their agents and the implications of non-compliance.

To achieve P, you are required to advice the clients on tax planning by explaining the tax obligations of tax payers and the implications of non- compliance.

To achieve M2, a range of sources of information should have been used to explain clearly the obligations .In addition to the above , as a practitioner brief on the Self -assessment procedure, maintaining of records and penalty if not complied by the tax payer.

LO -3- Be able to calculate corporation tax liabilities for companies. "Scenario ‘B' Covers LO 3.1, L O 3.2 and LO 3.3

Crowne Ltd, a UK registered company has diversified its operations since the last financial year . Its profits have increased three fold and the company is under pressure from the auditors as they feel the tax returns may go inaccurate. Crowne Ltd has appointed Pearl Co. as their tax consultants. You are one of the lead team member of Pearl Co. As a leader of the team, you work on the tax calculation and advice Crowne Ltd on filing of returns, maintenance of books of records and also advice Crowne Ltd on adherence of tax payment rules and regulation for the year 2016-17.

 

You are given the accounts of Crowne Ltd for the year to 31 March 2017.

 

£

£

Sales

 

4000,000

Less: Cost of Sales

 

600,000

Gross Profit

 

3400000

Add: Other income:

 

 

Profit on sale of asset

 

1,000

Interest received

 

2,200

Rental income

 

8,000

Dividend received

 

4,500

 

 

3415700

Less: expenses:

 

 

Salary and wages

50,000

 

Maintenance

3,000

 

Water bill

1,000

 

Telephone Expenses

2,500

 

Motor Car Expenses

6,500

 

Heating

6000

 

Depreciation

5,000

 

Advertisement

6,000

 

Subscription

3,000

 

Entertainment expenses

4,700

 

Donation

900

 

Legal and professional charges

600

 

General Expenses

3,200

 

Directors' fees

5,000

 

Audit fees

2000

99400

NET PROFIT

 

3316300

a) The amount of £ 3,000 for Maintenance includes £500 purchase of printer.

b) Motor Car expenses include 2% personal expenses of the CFO.

c) Entertainment expenses includes :-

Gift to customers (table clock costing £13 each for 5 customers) £ 65

Customers' entertainment £40

d) Donation is done to a trading party for local charity purpose.

e) Legal and Professional Fees includes:-  £50

Accountancy fees Special Audit fees  £100

f) General Expenses includes a mobile usage fine of £50 ,paid by the director for using mobile while driving.

g) Plant and Machinery:

On 1 April 2016 the opening balance of plant and machinery in the pool was £2,200

The following transactions took place during the year ended 31 March 2017: £2,200

September 2016 Purchased equipment £850,000
June 2016 Purchased Car (CO2 emmission is 130 g/ km) £ 25,000
January 2017 Sold equipment £2,800

h) The details of some trading loss to be adjusted is as follows:-

Loss for the year ended 31 March 2015 £3800

Loss for the year ended 31 March 2016 £300

Task 4 (LO3- AC 3.1 ) Calculate Chargeable profits (TTP) P, M1, D1

Required:-

To determine the chargeable profits of Crowne Ltd for the year ended 31 March 2017after necessary adjustments.

To achieve P, you are required to calculate the chargeable profits of Crowne Ltd. (Your answer should clearly show the calculation of Capital Allowance, trading loss adjustment and the computation of TTP).

To achieve M1, you will have to make effective judgements while including each item of expense and income which are allowed and disallowed in calculation of chargeable profits.

To achieve D1, you should justify the conclusions drawn on the basis of relevant rules and formulas and its application giving neat explanation wherever necessary.

Task 5 (LO3- AC 3.2 ) Calculate the tax liabilities and due payment date P, M3

Required:-

Calculate the tax liabilities of Crowne Ltd for the year ended 31 March 2017 and specify due date for filing the return and payment of tax. What are the consequences of late filing after the due date?

To achieve P, you in the capacity of an advisor is required to assist Crowne Ltd in calculation of tax liability for the company.

To achieve M3, you should have used appropriate methods and techniques with clean workings and notes to justify the difference in tax rates between the periods (if applicable) and how it has an impact on the final tax payable by the company.

Task 6 (LO3- AC 3.3) Explain how income tax deductions are dealt with. P, M2, D2

Required:-

As a tax adviser, you are required to show the various tax deductions to be made by Crowne Ltd and how to deal with it.
To achieve P, you are required to explain the various tax deductions for Crowne Ltd during the year 2016/17.

To achieve M2, you should have used different sources to collect data on tax deductions relevant for companies like Crowne Ltd.

To achieve D2, you should have demonstrated autonomy or independence in research and study and should have met the deadline to submit the tasks and achieve the unit assessment criteria.

Evidence checklist

Summary of evidence required by student

Evidence presented

Task 1 Describe the UK Tax Environment

Task 2 Analyse the role and responsibilities of the Tax Practitioner

Task 3 Explain the tax obligation of tax payers or their agents and the implications of non-compliance.

Task 4 Calculate chargeable profits

Task 5 Calculate the tax liabilities and due payment date.

Task 6 Explain how income tax deductions are to be dealt with.

Reference no: EM131276320

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