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Identify the accrued income, prepaid income, expenditure and calculate the taxable income for Murray. He operates...

Identify the accrued income, prepaid income, expenditure and calculate the taxable income for Murray. He operates a fitness school and use accrual basis accounting for his business. He provides the following information (all amounts are exclusive of GST) for the year of 2013/14: (PC - 1.6) Murray had the receipts: • Cash takings from casual lessons $18,000 • Receipts from regular customers $288,000 (All bookings are received in advance of the actual lessons) He had the following account balance: • Income received in advance as at 1 July 2013 $22,000 • Income received in advance as at 30 June 2014 $28,000 He also incurred the payments on 1 January 2014: • For the following 12 months rent of the business premises $40,000 • For the following 12 months lease of the business equipment $46,000

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Expert Solution

Receipts From regular Customers    288,000.00
Cash Takings from Casual Income      18,000.00
Total Receipts    306,000.00
Add: Income Recd. In Advance - July 1      22,000.00
Sub-Total    328,000.00
Less: Income Received in Advance- July 31    (28,000.00)
Accrued Income    300,000.00
Prepaid Rent - Jan 1 2014      40,000.00
Rent Expense per Month - $40,000 / 12        3,333.33
Lease of Business Equipment      46,000.00
Lease Expense per Month - $46,000 / 12        3,833.33
Prepaid Rent on July 31 - $40,000 - ($3,333.33 X 7 Months)      16,666.67
Prepaid Lease Rent on July 31 - $46,000 - ($3,833.33 X 7 Months)      19,166.67
Expenses for the Month of July, 2014
Rent Expense        3,333.33
Lease of Business Equipment        3,833.33
Total Expense        7,166.67
Accrued Income    300,000.00
Less: Expense        7,166.67
Taxable Income    292,833.33

ekkarill92 answered 2 years ago
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