Your client is a medium-sized building company and has provided you with its accounting records for the current financial year. Included in the accounting figures are the following amounts. How would you treat them for tax purposes?Provision for long service leave for 10 employees — $25,000. The actual amount paid during the year was $12,000.Insurance premium on the plant and equipment — $22,500, paid on 1 June for 12 months.As at 30 June, there is an outstanding electricity account for $1,500 and telephone account for $4,500.A maintenance contract on the computer equipment for 12 months — $12,000. The payment was made in the current year but the contract ends in May the following year.The sum of $165,000 was paid to the sales manager as compensation for the early termination of his employment contract. The employment contract had one year to go; it would have ended on 30 June of the following year.Interest expense of $56,000 on a loan that has five years to run that was originally used to purchase a computer repair business which ceased to operate on 30 June 2019.

Taxable income is the amount of income computed to measure the amount of taxes to be paid to the…

Answered: Your client is a medium-sized building…

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter16: Accounting Periods And Methods

Section: Chapter Questions

Problem 3DQ

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Your client is a medium-sized building company and has provided you with its accounting records for the current financial year. Included in the accounting figures are the following amounts. How would you treat them for tax purposes?

Provision for long service leave for 10 employees — $25,000. The actual amount paid during the year was $12,000.
Insurance premium on the plant and equipment — $22,500, paid on 1 June for 12 months.
As at 30 June, there is an outstanding electricity account for $1,500 and telephone account for $4,500.
A maintenance contract on the computer equipment for 12 months — $12,000. The payment was made in the current year but the contract ends in May the following year.
The sum of $165,000 was paid to the sales manager as compensation for the early termination of his employment contract. The employment contract had one year to go; it would have ended on 30 June of the following year.
Interest expense of $56,000 on a loan that has five years to run that was originally used to purchase a computer repair business which ceased to operate on 30 June 2019.

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