Question

QUESTION 10

1. Wei Pty Ltd is a company that has a credit balance of $10,000 in its franking account at 1 July 2019. It pays a PAYG instalment of $21,000 in respect of income from the previous year on 19 July 2019.

   It pays PAYG instalments in respect of income tax for the current year of:

   • 20 October - $19,000
   • 20 January - $18,500
   • 20 April - $20,500

   On 21 April 2020, the company declares and pays a fully franked dividend of $28,000 from profits.

   Calculate the balance of the company’s franking account at 30 June 2020.

   		$68,000
   		$77,000
   		$12,000
   		$56,000
   		$89,000

Answer 1

We can calculate the desired result as follows:

Particulars	Debit	Credit
Opening Balance		$ 10,000
PAYG Installment from Previous years		$ 21,000
PAYG Installment on 20 October		$ 19,000
PAYG Installment on 20 January		$ 18,500
PAYG Installment on 20 April		$ 20,500
Fully Franked Dividend = 28,000 * (0.3/0.7)	$ 12,000
Total	$ 12,000	$ 89,000

Closing Balance as on 30 June 2020 = 89,000 - 12,000

= $ 77,000

So, the correct answer is option (b)

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