How would they be required to account for any capital gain

Assignment Help Accounting Basics

Reference no: EM132122979 , Length: word count:1200

Assessment -

Question 1 - The Lotteries Commission conducts an instant lottery called 'Set for Life' under which a winner who scratches three 'set for life' panels wins $50,000 each year for 20 years. The first $50,000 is payable as soon as the winner is notified, and later amounts are payable on the first anniversary of the first payment. In the event of the death of the winner, the Commission may pay any outstanding amounts to the deceased's estate.

Requirement: Is the annual payment income? Give reasons for your decision.

Question 2 - Corner Pharmacy is a chemist shop. It provides no credit sales but accepts major credit cards. It sells items off the shelf and the proprietor fills prescriptions for cash and for payments made under the Pharmaceutical Benefits Scheme [PBS].

Three (03) assistants are employed. The following financial data is provided:

Cash sales	$300,000
Credit card sales	$150,000
Credit card reimbursements	$160,000
PBS:
Opening balance	$25,000
Closing balance	$30,000
Billings	$200,000
Receipts	$195,000
Stock
Opening stock	$150,000
Purchases	$500,000
Closing stock	$200,000
Salaries	$60,000
Rent	$50,000

Requirement: On the assumptions that an accrual basis applies and the cost of sales and other outlays are allowable deductions for tax purposes, calculate the pharmacy's taxable income.

Question 3 - What principle was established in IRC v Duke of Westminster [1936] AC 1? How relevant is that principle today in Australia?

Question 4 - Joseph (an accountant) and his wife Jane (a housewife) borrowed money to purchase a rental property as joint tenants. They entered into a written agreement which provided that Joseph is entitled to 20% of the profits from the property and Jane is entitled to 80% of the profits from the property. The agreement also provided that if the property generates a loss, Joseph is entitled to 100% of the loss. Last year a loss of $40,000 arose.

Requirement: Now is this loss allocated for tax purposes? If Joseph and Jane decide to sell the property, how would they be required to account for any capital gain or capital loss?

Reference no: EM132122979

Questions Cloud

What does discounting mean to an economist : Economists often use the concept of "discounting" in their studies. What does "discounting" mean to an economist?

Develop a critical understanding of the complex character : MPM7007: Management of Mega and Complex Projects - develop a critical understanding of the complex character, causes, and consequences of success and failure

Managing the activities of several fire companies : What level of administrative chief fire officer is responsible for managing the activities of several fire companies within a defined geographic area

Are human beings the pinnacle of evolution : 1. Why do you think that some species survive and evolve while others go extinct? 2. Are human beings the pinnacle of evolution?

How would they be required to account for any capital gain : HA3042 Assessment- Now is this loss allocated for tax purposes? If Joseph & Jane decide to sell property, how they required to account for any capital gain

What do you expect will happen to the amount : What do you think happens to the average amount transferred and the probability of acceptance if subjects A and B are told they might be matched.

Mid-latitude cyclones formally in that area : In what way was the 1993 "storm of the century" different in comparison to other mid-latitude cyclones formally in that area?

Determine the distance in kilometers : America at North Carolina to northwestern Africa at Mauritania (20°N latitude). Determine the distance in kilometers, then convert to centimeters.

What is the flux of energy coming into the upper surface : The solar panel has an albedo of 0.2. What is the flux of energy coming into the upper surface of the solar panel in Watts per square meter (W/m^2)?

User Account

All Pages