Reference no: EM132572374

case study: Emma owns a small business that provides consultancy services. Emma's relevant financial information relating to her business for the income year is as follows:

• total gross sales receipts $129,568

• total deductible expenses paid $30,062

• trade debtors at start of income year $8,864

• trade debtors at end of income year $6,180

• trade creditors at start of income year $5,946

• trade creditors at end of income year $4,680

All trade debtors at the start of the income year were collected during the year and are included in sales receipts. All trade creditors at the start of the income year were paid during the year and are included in deductible expenses paid.

Emma's owners' drawings from her business during the year totalled $52,000.

In addition to the above business information, Emma's other personal receipts and payments for the income year were as follows:

• net capital gains (from sale of taxable assets) $2,860

• gross bank interest received $1,012

• tax agent fees paid $ 350

It is anticipated that income tax rates will be lower for the following income year.

questions:

Question a Calculate Emma's taxable income for the income year under the cash method of income recognition

Question b Calculate Emma's taxable income for the income year under the accruals method of income recognition.

Question C Suggest three specific ways in which Emma might be able to legally reduce her taxable income before the end of the income year.