Abby runs a printing business and leases a building for which she pays rent of $75,000 per annum.

During the year ended 30 June 2020, Abby incurred the following expenses:

Painting of the exterior of the building at a cost of $12,000. The original paintwork was peeling and mouldy and didn’t represent the kind of look Abby wanted for her business.

Re-surfacing of the dirt carpark with a new non-slip cement to fill in pot-holes and create a safer environment for her customers $8,000

Replace torn awning over the front door for $1,500. The replacement awning was made of the same material as the original awning.

Payment of $22,000 for a commercial embroidery machine so that Abby could introduce clothing design and printing into her business. The machine was purchased on 10 February 2020 and installed on 26 February 2020.

Advise Abby if the expenses would be deductible with reference to relevant statute or other supporting documents.

Brick Ltd is a building construction company. On 1July 2017, Brick Ltd signed a contract with Pear Ltd to build a factory. The contract price was $ 12,000,000. The relevant information is as follows:

Pear Ltd will be in control of the asset throughout the construction process. The contract is completed on 30 June 2020. Brick Ltd has a financial year ending 30 June. Assume that the actual costs and cash collections are in line with expectations and the stage of completion can be reliably estimated.

Required:

1. Calculate the total profit that will be recognised in the books of Brick Ltd for the year ended 30 June 2018, 2019 and 2020.                                                                                                                   
   

The profit that you have calculated in Part (a) above, is it based on input method or output method? Justify your answer based on AASB 15 “Revenue from Contracts with Customer

At 30 June 2019, the financial statements of McMaster Ltd showed a building with a cost of $300 000 and accumulated depreciation of $152 000. The business uses the straight-line method to depreciate the building. When acquired, the building’s useful life was estimated at 30 years and its residual value at $60 000. On 1 January 2020, McMaster Ltd made structural improvements to the building costing $94 000. Although the capacity of the building was unchanged, it is estimated that the improvements will extend the useful life of the building to 40 years, rather than the 30 years originally estimated. No change is expected in the residual value.

Required

1. Calculate the number of years the building had been depreciated to 30 June 2019.
2. Give the general journal entry to record the cost of the structural improvements on 1 January 2020.   

c.Give the general journal entry to record the building’s depreciation expense for the year ended 30 June 2020.

Australian Taxation

Abby runs a printing business and leases a building for which she pays rent of $75,000 per annum. During the year ended 30 June 2020, Abby incurred the following expenses: Painting of the exterior of the building at a cost of $12,000. The original paintwork was peeling and mouldy and did not represent the kind of look Abby wanted for her business. Re-surfacing of the dirt car park with a new non-slip cement to fill in pot-holes and create a safer environment for her customers $8,000 Replace torn awning over the front door for $1,500. The replacement awning was made of the same material as the original awning. Payment of $22,000 for a commercial embroidery machine so that Abby could introduce clothing design and printing into her business. The machine was purchased on 10 February 2020 and installed on 26 February 2020. Advise Abby if the expenses would be deductible with reference to relevant statute or other supporting documents.

Marydale Products permits its customers to defer payment by giving personal notes instead of cash. All the notes bear interest and require the customer to pay the entire note in a single payment 6 months after issuance. Consider the following transactions, which describe Marydale’s experience with two such notes:

Information for the economy of Pogo

2019

• Interest payments received from Foreign on Foreign assets owned by Pogo:                     $45M
• Interest payments paid to Foreign citizens on Pogo assets owned by Foreign:                   $48M
• Federal Reserve Bank of Pogo’s holding of interest-free Foreign assets, start of 2019:   $85M

2020

• Interest payments received from Foreign on Foreign assets owned by Pogo:                     $46M
• Interest payments paid to Foreign citizens on Pogo assets owned by Foreign:                   $52M
• Federal Reserve Bank of Pogo’s holding of interest-free Foreign assets, start of 2020:   $77M

Assumptions:            

• Interest rate on Foreign assets is 5% and the Interest rate on Pogo assets is 8% for both 2019 & 2020.
• Foreign central bank does not hold Pogo assets
• There are no Foreigners working in Pogo and no Pogo citizens working in Foreign during these years.

Questions:

What is Pogo’s balance of payments in 2019? Show your work

MS = 1/rrm(TR) MD = 75 –220(i) + 3.0(Y) where i represents the rate of interest, Y represents national income, rrm represents the fractional reserve requirment ratio, and TR represents total reserves. Assume national income in 2019 was $1,000 and is projected to be 10 percent higher in 2020. Also assume the reserve requirement ratio is 0.25 and total reserves at depository institutions is 120.

a. What market clearing interest rate would you project for 2020?

b. How much must the money supply change to achieve an interest rate in 2020 of 9 percent? (Hint: using whole percent rather than decimal equivalent; e.g., using 9 rather than .09).

c. If the fractional reserve requirment ratio remains unchanged, what level of total reserves must the central bank achieve to lower the interest rate to its target of 9 percent?