How do calculate the taxable income and net tax payable

Assignment Help Financial Accounting

Reference no: EM132742788

Woody and Buzz have a partnership and are equal partners running a business known as The Toy Store. It's a party venue business that provides children's parties and corporate events. It provides a complete service including arranging the food, decorations, entertainment, and party goods. It also hired out some of its equipment when it was not being used in its own business to movie sets.

The accounts of Woody and Buzz for the year ended 30 June 2020 are as follows:

Receipts $

Cash banked in respect of parties planned and hosted 321,000

This included $11,250 which was from parties completed last financial year. Functions which were completed in the current year but not yet paid total $7,800.

Hire of equipment 32,400

Interest on drawings ($340 for Woody and $170 for Buzz) 510

Interest received 1,350

Expenditure

Purchases 63,240

Staff salaries (this amount included $19,000 paid to Woody's cousin, Jessie, who works part-time and was paid $4,000 more than a non-related employee who works the same hours doing a similar job) 92,000

Staff superannuation 8,280

Provision for annual leave 7,080

Salaries for Woody and Buzz ($60,000 for Woody and $40,000 for Buzz) 100,000

Superannuation for Woody and Buzz ($5,400 for Woody and $3,600 for Buzz) 9,000

Interest on capital ($790 for Woody and $540 for Buzz) 1,330

Repair of a space bouncy castle 890

Purchase of a star machine 640

Legal fees 2,500

Additional information

(a) The legal fees arose as a result of Woody and Buzz consulting their lawyers and accountants to advise them if in future they should change their structure to a company.

(b) Annual leave actually paid during the year was $3,400.

Required:

Problem 1. Calculate the net income of the partnership assuming they do not want to use Small Business Entity (SBE) elections.

Problem 2. Determine the partnership distribution and calculate the taxable income and net tax payable by each partner. You do not have to calculate the Small Business Tax (SBT) Offset.

Reference no: EM132742788

Questions Cloud

What was the cost of the work-in-process inventory : A sporting goods manufacturer buys wood as a direct material, What was the cost of the work-in-process inventory in the Finishing Department at the end of May?

Outsourcing-a strategic advantage : What are the risks and benefits of the outsourcing approach? What are the strategic advantages of outsourcing to vertically integrated firms?

Importance for having a union in a public school : What is the importance for having a union in a public school?

Briefly describe your chosen clinical issue of interest : Your quest to purchase a new car begins with an identification of the factors important to you. As you conduct a search of cars that rate high on those factors.

How do calculate the taxable income and net tax payable : Calculate the taxable income and net tax payable by each partner. You do not have to calculate the Small Business Tax (SBT) Offset.

Were spyke and wide-eye bad products : Were Spyke and Wide-Eye bad products? Justify your answer. Do you think these products were marketed in objectionable or misleading ways?

Make retained earnings statement for the year ended December : Sumter Pumps Corporation, a manufacturer of industrial pumps, Make retained earnings statement for the year ended December 31, 20Y3

Mandatory part of the contract writing : Suppose you are the investor (sponsor) in a project, mention 5 key points you would like to be mandatory part of the contract writing?

How well are the given theories put to practice : A walk through the Business section of any bookstore or a quick Internet search on the topic will reveal a seemingly endless supply of writings on leadership.

User Account

All Pages