Reference no: EM133189021

Question - Sales for the Australian trading company Rooney Enterprises Ltd. during the last financial year (2008) amounted to $3.5 million. The company has a 5-year contract to provide the plastic studs that are screwed into the bottom of football boots to all government primary schools in Australia.

The direct costs of Rooney Enterprises Ltd. operations were $2.5 million and other operating expenses totalled $700,000. In addition, the company also earned Australian sourced interest income from investments of $45,000 and incurred interest expenses on borrowings of $30,000.

Dividends paid to shareholders in the 2008 financial year (arising from profits earned in financial years prior to the 2008 year) totalled $87,000. There is also a loan of $395,000 currently owing to the bank as at the end of the 2008 financial year. The company tax rate is 30%.

Required -

1- Calculate the tax liability of Rooney Enterprises Ltd. for the 2008 financial year.

2- Briefly justify the financial transactions listed above that you have not included in your calculation of the 2008 tax liability of Rooney Enterprises Ltd.

3- What is the maximum amount of fully franked dividends that the company could pay from its 2008 financial year net income?

4- What would be the amount of imputation credits associated with the maximum dividend payment possible in Q3 of this question?