Question

Kate is a motor vehicle dealer and had an opening value of trading stock for tax purposes of $120,000 on 1 July 2013. She purchased $600,000 worth of cars during the year and incurred freight and insurance costs of $11,000. She also incurred selling costs of $4,000 and had sales of $900,000. Her stock on hand on 30 June 2014 was: $140,000 (cost price); $110,000 (replacement value); and $130,000 (market selling value). Assuming that Kate wishes to minimise her income, what will her taxable income be for the year ended 30 June 2014?

TAX LAW

Answer 1

Calculation of Taxable Income for Kate for the year ended 30 June 2014
Particulars	Amount	Particulars	Amount
To Opening Stock	$1,20,000	By Sales	$9,00,000
To Purchases	$6,00,000	By Closing Stock	$1,30,000
		(Cost Or MV whichever is lower)
To Gross Profit	$3,10,000
	$10,30,000		$10,30,000
To Selling Costs	$4,000	By Gross Profit	$3,10,000
To Net Profit	$3,06,000
	$3,10,000		$3,10,000
Taxable Income	=	$3,10,000