Michael operates his own business selling pool equipment and materials as well as servicing swimming pools. During the year
ended 30 June 2019 Michael received $915,000 in cash for sales of equipment andmaterials and for pool services. Wages of
$275,000 were paid to his staff. This included an amount of $50,000 paid to his brother. The work of the brother could have been
done by an unrelated person for $10,000. On 1 June 2019, Michael paid $4,530 to his lawyer to complete the winding up of a
business he had operated at a loss in earlier years. One of Michael’s customers bought some pool materials for $600 on credit
on 21 June 2018 but could not pay the account which was issued on the same day because he went bankrupt in November 2018.
Michael wrote off the debt on 1 July 2019. During the year ended 30 June 2019 Michael paid rates and taxes of $5,270 on a
vacant block of land. Michael was thinking of putting a holiday house on the block of land.
Michael made an interest free loan of $500,000 on 1 January 2019 to one of his employees. The employee used the loan for two
purposes: 30% for the purchase of an investment property and 70% to pay off his home mortgage. On 1 March 2019 Michael
paid the life Insurance premium for one of his employees in the amount of $25,000.
Michael bought a rental property on 4 July 2018 for $1,000,000. He borrowed $750,000 of this money on the same day from
the bank to buy the property. The term of the loan was 4 years. The property was leased on 4 July 2018. He received rent in
cash from his tenants during the year ended 30 June 2019 in the amount of $95,000. On 1 July 2018 Michael paid the bank a loan
application fee of $1,570
In this case, you have been notified by Mr. Hirum Andfirum, Human Resources Director for the Makestuff Company, that the company has just terminated Mr. Got Yourprop, a former engineer in the company’s New Products Division, for cause. Mr. Andfirum tells you that at Mr. Yourprop’s exit interview earlier that day, the terminated employee made several statements to the effect of “it is okay because I have a new job already and they were VERY happy to have me come from Makestuff, with ALL I have to offer.” Mr. Yourprop’s statements made Mr. Andfirum fear he might be taking Makestuff’s intellectual property with him to his new employer (undoubtedly a Makestuff competitor). In particular, Mr. Andfirum is worried about the loss of the source code for “Product X,” which the company is counting on to earn millions in revenue over the next three years. Mr. Andfirum provides you a copy of the source code to use in your investigation. Lastly, Mr. Andfirum tells you to remember that the Company wants to retain the option to refer the investigation to law enforcement in the future, so anything you do should be with thought about later potential admissibility in court
March 29, 2015
1:27 pm
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