Requirement: Explain the GST consequences of this arrangement for both companies.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Surfs Up P/L is a national retailer that sells a range of surfing and water sports equipment (surfboards, clothing,
etc.) with an annual turnover of $60 million. Surfs Up purchases "Billapro" surfboards for $440 each from
Billapong P/L, a large manufacturer of surfboards located at Gold Coast with an annual turnover of around $45
million, this was their only sale for the month. Surfs Up plans to sell the Surfboards at a 200% mark-up to its
customers. In October last year it purchased 370 surfboards but a couple of months later (December) they
discovered that 14 of the surfboards were faulty and subsequently returned these faulty surfboards to the
manufacturer, obtaining a full refund. Assume both apply the accrual method of accounting.
Requirement:
Explain the GST consequences of this arrangement for both companies.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F143c790f-c904-4649-a56a-b581514eec84%2Fb65cc55b-ee8c-4c22-9f9a-29c7be49f1f4%2Febwk0u_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Surfs Up P/L is a national retailer that sells a range of surfing and water sports equipment (surfboards, clothing,
etc.) with an annual turnover of $60 million. Surfs Up purchases "Billapro" surfboards for $440 each from
Billapong P/L, a large manufacturer of surfboards located at Gold Coast with an annual turnover of around $45
million, this was their only sale for the month. Surfs Up plans to sell the Surfboards at a 200% mark-up to its
customers. In October last year it purchased 370 surfboards but a couple of months later (December) they
discovered that 14 of the surfboards were faulty and subsequently returned these faulty surfboards to the
manufacturer, obtaining a full refund. Assume both apply the accrual method of accounting.
Requirement:
Explain the GST consequences of this arrangement for both companies.
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