Problem
Question I
Ben Smith and Elias Jones commenced a partnership in a business erecting pergolas and garden furniture. After their first year of trading they showed a net profit of $50 000. In their partnership agreement, profits are shared equally between the partners after adjusting for the following:
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Partners salaries
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Smith $10 000, Jones $10 000
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Interest on capital
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Jones $5000
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Interest paid on advance from Smith
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$3000
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Interest on drawings
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Jones $2000
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Task
1. Calculate s.90 partnership net income.
2. Preapre a distribution statement.
3. Calculate assessable income.
Question II
Franco is the owner of a garden maintenance and landscaping business which services the Perth metropolitan area. He drives a Holden Vitoria Utility which he purchased in 2006 at a cost of $32 000. It has a 3200-cc capacity engine and it is primarily used for picking up supplies and transporting materials and tools to his various jobs.
Frank was conscientious with his record keeping and for this reason kept a comprehensive log book for the current tax year.
Information included in his log book included the following:
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Travel to suppliers and customers
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2300 km
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Travel from home to work
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1890 km
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Private family travel
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160 km
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Total
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4350 km
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Franco's running costs for the year including the decline in value (depreciation) totalled $12 800.
Task
1. Using the information above, calculate the maximum amount that Frank would be able to include as a deduction for car expenses for the year from the methods available to him.
2. What other vehicles are treated in the same way as Franco's?