Sample/practice exam 2017, questions and answers PDF

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10 Sample Multiple Choice Questions 1.

Edward Smith, an Australian resident individual, received the following cash dividends:   

$246,720 (franked to 50%) from XYZ Ltd on 1 February 2016 $14,000 (unfranked) from ABC Ltd on 1 March 2016 $4,900 (fully franked) from DEF Ltd on 1 May 2016

What is his total amount of tax offsets (rounded to the nearest dollar)? A: B: C: D: E:

$54,969 $113,837 $107,837 $2,100 None of the above

(246,720 x 50% x 30/70 = $52,868.57) + ($4,900 x 30/70 = $2,100) =$54,969 Answers is A 2.

Michael purchased a machine for use in his business for $100,000 on 11 May 2015. The machine is used 100 percent for business and Michael is not an SBE. The effective life of the machine at the time of acquisition was five (5) years. His depreciation claim (assuming the diminishing value method applied and rounded to nearest $1) for the year ended 30 June 2015 will be: A: B: C: D: E:

$40,000 $5,589 $4,192 $20,000 $2,795

($100,000 * 200%/5 * 51/365) = $5,589 Answer is B 3.

Which one of the following is NOT a criterion relevant in determining if a taxpayer is carrying on a business? A. The degree of system and organisation characterizing the taxpayer’s activities. B. The scale of the taxpayer’s activities. C. The regularity and frequency of the taxpayer’s transactions. D. The legality of the taxpayer’s operations. E. The intention of the taxpayer to make profit from the operations.

Answer is D 4.

Lucy Liu is an Australian resident who moves to the Gold Coast. Before moving, Lucy sold the following assets: Asset Rental property Shares Stamp

Purchase Price $150,000 $55,000 $9,500

Sale Price $380,000 $160,000 $8,000

All assets were purchased on 1 December 1999 and sold on 30 June 2016. Assume she has no other relevant income or deductions for the tax year. Her Taxable Income would be: A: B: C: D: E:

$230,000 $105,000 $334,500 $167,250 $167,500

((380,000‐150,000) + (160,000 – 55,000))/2 = $167,500 Answer is E 10 Sample Multiple Choice Questions ANSWERS 13 10 16.doc

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5.

In October 2015 Samuel and Lenny bought a property for $440,000 in Haymarket. They bought it with the intention of using it for rental purposes. However, before attempting to rent it out, they decided it would be best to fix the property, at a cost of $2,125, so to make it more attractive to rent. The income and expenses for the year ending 30 June 2016 were: ($) 10,000

Details Rental Income Water Repairs Division 40 Deduction Commission for collecting rent Rates

($)

1,100 2,125 1,246 967 900

The net income of the partnership for the year is: A: B: C: D: E:

$3,662 $5,787 $3,662 loss $ nil None of the above

10,000 ‐ 1,100 ‐ 1,246 – 967 ‐ 900 = $5,787 Answer is B 6.

John Smith Pty Limited, a private company, had the following transactions in relation to its franking account during the year ended 30 June 2016:        

Opening credit balance on 1 July Received a fully franked dividend on 6 October Paid income tax instalment on 14 October Received a refund of tax on 11 December Paid income tax instalment on 7 March Paid a fully franked dividend on 28 March Paid income tax instalment of on 8 April Paid a partial franked (50%) dividend franked on 28 May

$88,000 $148,000 $66,000 $77,000 $6,000 $66,000 $16,000 $366,000

What is the closing balance (rounded to the nearest $1) of the franking account at year end? A: B: C: D: E:

$114,000 credit $95,000 debit $54,287 credit $55,715 credit $22,715 debit

Opening credit balance on 1 July Received a fully franked dividend on 6 October Paid income tax instalment on 14 October Received a refund of tax on 11 December Paid income tax instalment on 7 March Paid a fully franked dividend on 28 March Paid income tax instalment of on 8 April Paid a partial franked (50%) dividend franked on 28 May Under franking penalty

$88,000 $148,000 30/70 = $66,000 $77,000 $6,000 $66,000 x 30/70 = $16,000 $366,000 x 50% x30/70 = $366,000 x 50% x30/70 = Final Balance

$88,000 CR $63,429 CR $66,000 CR $77,000 DR $6,000 CR $28,286 DR $16,000 CR $78,429 DR $78,429 DR $22,715 DR

Answer is E

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7.

The Federal Government introduced a major reform to the tax system, which commenced on the 1 July 2000. Essentially, the government introduced a new tax, which was: A. B. C. D. E.

A fringe benefits tax payable by employees. A land tax paid by property developers. An extension of capital gains tax to goods & services. A turnover tax paid by those who sell services to supplement sales tax on goods. A consumption tax paid by the supplier of goods and services.

Answer is E 8.

In the Fringe Benefits Tax year ended 31 March 2014, Jim paid $1,500 for his employee’s son’s school fees. Jim could not claim the input tax credit for GST purposes. The employer’s grossed up taxable value (rounded to the nearest dollar) on this item is: A: B: C: D: E:

$1,500 $3,097 $2,804 $1,440 $1,304

($1,500 * 1.8692) = $2,804 Answer is C 9.

Fred conducts a legal practice in Melbourne as a sole practitioner. He employs 5 Solicitors and 5 secretaries. He provides you with the following information relating to his business for the year ended 30 June 2016: Cash received from clients during the year Legal Aid re‐imbursement for work done by Fred received during the year Accounts Receivables (30 June 2015) Accounts Receivables (30 June 2016) Salaries paid to employees Other office expenses

$1,280,000 $50,000 $25,000 $40,000 $260,000 $70,000

What is Fred’s taxable income from his business for the year ended 30 June 2016? A: B: C: D: E:

$950,000 $330,000 $1,234,000 $1,015,000 $990,000

$1,280,000 + $50,000 ‐ $25,000 + $40,000 ‐ $260,000 ‐ $70,000 = $1,015,000 Answer is D

10 Sample Multiple Choice Questions ANSWERS 13 10 16.doc

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10.

Jack and Tammy are in partnership and sell rare stamps. They agree that Jack will receive a wage of $50,000 and the balance of the profits thereafter is to be split 50/50. The accounts for the 2016 tax year were: Sale of stamps Purchase of stamps Value of stamps (30 June 2015) Value of stamps (30 June 2016) Wages to Jack Rent Electricity and ‘phone

$440,000 $225,000 $85,000 $46,000 $50,000 $20,000 $3,000

How much does Jack include in his tax return as assessable income? A: B: C: D: E:

$115,500 $71,000 $90,500 $51,500 $101,500

440,000‐225,000‐ 85,000 + 46,000 ‐20,000 – 3,000 = 153,000 Net income = $153,000, Jacks Share $50,000 + (50% * $103,000) = $101,500 Answer is E

10 Sample Multiple Choice Questions ANSWERS 13 10 16.doc

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