Preparing budgets – sales budget and cash collection schedule

Tax
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Assignment Part A

Question1: Preparing budgets – sales budget and cash collection schedule

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Xavier is the manager of a national soccer club and has been asked to assist in the preparation of their sales budget for the year 2011. A total of 26 matches are played during the season and five scratch matches are played in the off-season. The club charges a $15 entry fee per person for seasonal games and a $10 entry fee for scratch matches. They also offer a membership package for $200 which entitles holders to attend all games played over the year. Membership packages are only available for purchase at the start of the year.

The number of tickets sold the previous year were as follows:

Quarter
1 2 3 4 Year totals
Memberships 15 006 – – – 15 006
Scratch matches 14 616 – – 16 235 30 851
Season tickets – 39 104 52 083 91 187
As the team won the league, the following assumptions have been made for the upcoming year:

– Memberships will increase by 5%.

– Attendance at scratch matches will increase by 3% in the 1st quarter and 1.5% in the 4th quarter.

– Season ticket sales will increase by 20% in the 2nd quarter and 15% in the 3rd quarter.

– The club has also decided to offer merchandise at each of the games at a cost of $5. Assuming all members attend every game, they expect 2% of all attendees to purchase merchandise at each of the games.
– Due to the nature of the business, all tickets and merchandise are paid for immediately. Of all season memberships, 90% are paid for in the 1st quarter with the remaining being collected in the next period.

Required: Based on the above information, prepare the sales budget and cash collection schedule for Xavier.

Question 2: Budget equation

The budget equation is “data + assumptions = projections”

– Data is factual information on past results.

– An assumption is a belief about the future.

– Future projections are made by using the data available and assumptions made about the future.

Classify the statements below as data, an assumption or a projection.

Next year we should have an increase in sales as trends show demand for our product to be increasing.
Last year our financial reports show we made a loss of $2320.
The market will become more competitive next year.
My husband won’t mop the floors tomorrow as he hasn’t done them the past 5 times I’ve asked.
We employed 100 new workers last year.
In 2010, Collingwood won the premiership against St Kilda in a grand final replay and are the favourites to win this year.
Interest rates will increase.
Today is pay day, so my wife will probably go shopping this weekend.
The cost of living has increased.
Adrian has an average of 85% in all his exams this semester, so he should pass the units he is studying.

Assignment Part B

Question1: Preparing budgets – sales budget and cash collection schedule

If you work for an organisation, answer the following questions about it. If you do not work for an organisation, pick one and do some research on it.
(a) What are the organisation’s vision and mission (if any)?

(b) What are the organisation’s goals or objectives?

(c) Does the organisation have a business plan?

(d) If you work for the organisation, what is your role within it?

(e) What values does the organisation stand for? Are these values stated formally by the organisation?

(f) Which of the organisation’s values agree with your own, and which do not?

(g) Using the criteria for SMART goals, create three goals that relate to your own workplace objectives.

Question 2: Forecasting

Sabirah has requested you prepare a forecast for her small business. Her income for the months of January through to March 2012 are shown below:

Required: Taking the following points into consideration, prepare a forecast for Sabirah for the next 3 months.

– Sabirah has a contract with Dazzles Jewellery for $3500 per month which expires on 31 August 2012.

– She currently charges DJ James $30 per hour for 50 hours per month. DJ James has advised her that he will require an additional 20 hours per month from 1 May onwards.

– Sabirah usually begins to see a downturn in revenues received from other clients as the winter months approach.

– On 1 January 2012 she invested $120 000 in a term deposit which receives a rate of 6% per annum, paid monthly.

– Sabirah has just recently commenced a new line of merchandise which she expects to see sales increase on over the coming months.

Question 3: Schedule of expected cash collections

Playtime Toy Factory is in the process of preparing their cash budget for November 2011. They have the following information:

– Opening cash balance on 1 November 2011 will be $9000.

– Actual sales for September and October, as well as the expected sales for November, are as follows:

– Ten per cent of credit sales are collected in the same month they are made, 70% are collected in the following month, 18% are collected in the subsequent month and the remaining 2% are bad debts.

Required: Prepare a schedule of cash collections for Playtime Toy Factory.

Assignment Part C

Question 1: Budget schedules

Sparks Pty Ltd has requested your assistance in preparing their budgets. The demand for the product they manufacture and sell is seasonal and peaks in the third quarter. They have provided you with the following information relating to their forecasts and expectations for 2012 and the first half of 2013:

– Spark’s product retails at $8 per unit and budgeted sales for 2012 and the first half of 2013 are as follows:

– Seventy-five per cent of sales are collected in the same quarter the sales are made and the remaining 25% in the following quarter. On 1 January 2012 the company will have $65 000 worth of accounts receivable which will all be collected in the first quarter of the year.

– Sparks Pty Ltd would like their ending inventory of finished goods at the end of each quarter to be equal to 30% of the budgeted sales for the next period. At the end of 2011 an ending balance of 12 000 units was in stock.

– Each unit requires 5 kilos of raw materials. The ending balance of raw materials should equal 10% of the following quarter’s production needs. At the end of 2011 an ending balance of 23 000 kilos of raw materials was in hand.

– The cost of raw materials is $0.80 per kilo. Sixty per cent of purchases made are paid for in the same quarter and the remaining 40% are paid for in the subsequent quarter. The accounts payable balance relating to raw material purchases on 1 January 2012 will be $81 500. This will all be paid for in the first quarter.

Required:

Using the information provided, prepare the following budgets and schedules for 2012 and the first half of 2013 showing both the quarterly and total amounts:

a sales budget and a cash collection schedule
a production budget
a purchases budget for direct materials and a cash disbursement schedule.

Assessment 1 – Theory Assessment

FNSACC502B Prepare legally compliance tax returns for individuals

Student Name: Date:

Recommended text: Pearson resources

Calculating net trust income
For the following transactions, calculate the net trust income for that period:

– Gross income $50 000

– Operating expenses $19 000

– Education expenses paid by the trustee on behalf of the beneficiaries $10 000

Taxation of trusts
Describe the tax returns and information required to be lodged by trusts for an income year. What is a statement of distribution and what information should it contain?

Task 2:

The following questions can be discussed in your groups.

What are the two ways in which a superannuation benefit can be paid?

Regardless of the way in which it is paid, superannuation benefit comprises two components. What are they?

What is the taxation of a superannuation benefit paid to a taxpayer from a complying fund based on?

A lump sum superannuation benefit received by a taxpayer who has reached their preservation age and below 60 years of age is taxed at the following rates:
Amount Rate of taxation
$ < $150 000
$150 000 < and <$1 100 000
$1 100 000

Describe what is meant by ETP.

Name at least three types of ETPs.

Describe the two components of a death benefit ETP and how they are taxed.

Don Evans has been employed by Castor Bricks for 15 years and upon his retirement on 31 January 2012, received an early retirement scheme payment of $60 000. Calculate the assessable amount of the early retirement scheme payment.

Task 3:

You are a tax agent and on 2 November 2011 one of your clients, Rebecca Organised, has come to you for assistance.

Rebecca is employed as a computer systems engineer and, due to her heavy work commitments, has not yet sorted out her tax matters. She currently earns $80 000 and has had $17 850 PAYG withheld from her gross income. Rebecca also received an unfranked dividend from BHP shares of $600

After sorting through the shoebox that holds all of Rebecca’s paperwork, you uncover the following receipts and expenses.

Software Programmer annual subscription

3 Mobile accounts totalling $800

Boffins Technical Bookshop receipts totalling $650

Home office expenses (stationery, electricity 20%, internet, printer consumables)

Bank interest

$
300

800

650

3500

1000

– Rebecca also advised that she had additional self-education expenses of $3500, but could not locate the receipts.

– Rebecca has no private health insurance and she is single and has no dependents.

– Rebecca often works from her home office and she is also required to travel on a daily basis to various work clients to service their computer systems. Rebecca has not kept a log book with her kilometres. Rebecca drives a Toyota Corolla which has a 1300-cc engine.

– Among her papers, you find a daily work log which details her client appointments, times and locations.

Required:

As her tax agent, what advice can you give Rebecca about the ATO’s lodgement process and deadlines?

What are Rebecca’s lodgement options?

What can you tell Rebecca about the self-assessment process?

What range of powers does the ATO have for auditing and reviewing a taxpayer’s tax affairs?

What advice can you give Rebecca about future tax preparation?

Calculate Rebecca’s taxable income.

Calculate Rebecca’s tax payable/refundable for the 2011/12 financial year, using the rates provided below.

Taxable income Tax on this income
0–$6000 Nil
$6001–$37 000 15¢ for each $1 over $6000
$37 001–$80 000 $4650 plus 30¢ for each $1 over $37 000
$80 001–$180 000 $17 550 plus 37¢ for each $1 over $80 000
$180 001 and over $54 550 plus 45¢ for each $1 over $180 000
*excludes Medicare levy

Taxable income Flood levy on this income
0–$50 000 Nil
$50 001–$100 000 0.5¢ for each $1 over $50 000
$100 000 and over $250 plus 1¢ for each $1 over $100 000

Assessment 2 – Case Study Assessment

FNSACC502B Prepare legally compliance tax returns for individuals

Student Name: Date:

Task 1:

In your group, review the ATO guidelines for home office expenses and answer the following:

Self-education expenses: Carol Clark is currently employed with St John’s Hospital in Suburbia. It has long been her desire to specialise in midwifery and so she commenced study towards her degree during the current financial year. In the course of the year she incurred the following costs:

$
Photocopying and stationery for study purposes 650
Course fees and textbooks 1 420
Childcare costs while working 6 500
Childcare costs while studying 1 980
Total home rent (20% is used as a home office for study purposes) 16 000

Using this information, calculate Carol’s deduction for self-education expenses for the financial year.

For each of the following, indicate what would be classed as an allowable deduction:
(a) Luis purchases computer programming textbooks for $800. He is employed as a lawyer and uses the books as a resource.

(b) Jacobus purchases $650 worth of paints and supplies. He uses these to paint portraits during the year for family and friends. He did not sell any portraits during the year.

(c) Murray travels to Geraldton to inspect a commercial property that he owns and derives rent from. During a visit he plans to meet with the tenants and determine any maintenance that may be required to be carried out.

(d) Lalita pays a total $8000 in childcare fees which enables her to continue her full-time employment as a dental nurse.

(e) Niklas pays $2500 in annual train fares to enable him travel to work each day.

(f) Angela purchases a computer for her business costing $3500.

(g) Allan pays $900 in phone calls and has kept records to estimate that 60% of his calls relate to business.

(h) Bethany is employed as a nurse and has purchased a traditional uniform for $560

(i) Ainsley is a sales representative and has estimated that his dry-cleaning bills for suits amount to $250.

(j) Guang has calculated that $140 is the total cost of laundry and maintenance expenses for his police uniforms.

Home office and study expenses: Discuss the following scenarios and decide what deduction would be allowable in each case.
(a) Stephenie conducts business as a tax agent. She runs her practice from a room at home. The room has a separate entrance and covers 20% of the total floor space of her home. It costs Stephenie a total of $24,000 a year in rent. How much would be allowable as a deduction for home office space to Stephenie?

(b) Robyn is employed as a teacher. She prepares lessons and marks tests each week from a room in her home which also houses her children’s toys and provides space for them to play. Mortgage, rates and interest charges for the house total $21,000 and she hopes to claim a 15% share which matches the percentage of space that her workroom takes up from the total floor space of his home. Would Robyn be entitled to deduct any amount of these expenses?

Task 2:

Stella Sharp is a casual bookkeeper who derives income from various investments including her superannuation fund and her share portfolio. Stella is 56 years old and has elected to apply all available small business concessions in her tax planning strategies.

Stella’s income receipts for the tax year are as follows:

$
Fully franked dividends 8 000
Superannuation income (PAYG withheld $1000) 36 000
Bookkeeping 9 000

Stella has private health insurance cover with HBF.

Using this information calculate Stella’s taxable income and net tax payable or refundable for the year using the following tax rates.

Taxable income Tax on this income
0–$6000 Nil
$6001–$37 000 15¢ for each $1 over $6000
$37 001–$80 000 $4650 plus 30¢ for each $1 over $37 000
$80 001–$180 000 $17 550 plus 37¢ for each $1 over $80 000
$180 001 and over $54 550 plus 45¢ for each $1 over $180 000
*excludes Medicare levy

Assessment 3 – Practical Assessment

FNSACC502B Prepare legally compliance tax returns for individuals

Student Name:

Date Submitted:

Task 1:

For the purpose of this exercise, please use the tax rates provided below:

Taxable income Tax on this income
0–$6000 Nil
$6001–$37 000 15¢ for each $1 over $6000
$37 001–$80 000 $4650 plus 30¢ for each $1 over $37 000
$80 001–$180 000 $17 550 plus 37¢ for each $1 over $80 000
$180 001 and over $54 550 plus 45¢ for each $1 over $180 000
*excludes Medicare and flood levies

Required:

Susan Gibney is a resident individual taxpayer.
During the tax year, Susan derived total income of $85 000 of which $6000 was exempt income.

Susan’s deductions for the year also totalled $7000.

(a) What is Susan’s assessable income?

(b) What is Susan’s taxable income?

(c) What tax-free threshold applies to Susan?

(d) If Susan were a non-resident for tax purposes, what tax-free threshold would she receive?

(e) Calculate Susan’s basic tax on taxable income.

The following people are resident individual taxpayers who are NOT liable for the Medicare Levy surcharge. In each instance, calculate their liability for Medicare Levy.

(a) Peter who has a derived taxable income of $30 000.

(b) Roger derived taxable income of $18 500.

(c) Janice derived taxable income of $17 700.

(d) David derived assessable income of $20 000 and incurred deductions of $5500.

(e) Mike derived assessable income of $28 000 and incurred deductions of $8000.

(f) Paul derived assessable income of $46 000 and incurred deductions of $12 000.

Task 2:

Sarah Miller is employed as retail display consultant for Wowee Window Displays. Her work takes her to various shopping centres and retail chains throughout the Perth metropolitan area. During the financial year, Sarah received a gross salary of $75 000 and a car allowance of $3000 which she uses to assist with the costs of running her 1300-cc Astra. Sarah has hospital cover with MBF.

She had $18 750 withheld in PAYG tax from her gross earnings.

During the financial year, Sarah kept a logbook which documented that her motor vehicle was used for 44% business use. Her odometer showed that she had travelled a total of 36 000 kms during the year. Sarah’s Astra originally cost $17 000 and has an adjustable opening value of $14 000. She calculates depreciation using the prime cost method over 8 years.

Other expenses incurred by Sarah are as follows:

$
Registration and insurance 2100
Tyres 350
Petrol 3500
Loan repayments (interest $800) 2800
Car washes 160
Parking 300
Taxis (while car is being serviced) 120

The tax rates for the year were as follows:

Taxable income Tax on this income
0–$6000 Nil
$6001–$37 000 15¢ for each $1 over $6000
$37 001–$80 000 $4650 plus 30¢ for each $1 over $37 000
$80 001–$180 000 $17 550 plus 37¢ for each $1 over $80 000
$180 001 and over $54 550 plus 45¢ for each $1 over $180 000
*excludes Medicare levy

Using the information above, calculate the following:

the maximum deduction available to Sarah for car expenses
Sarah’s taxable income for the tax year
tax payable by Sarah for the tax year including the Medicare levy.

 

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