Bowens Pty Ltd is a building materials supplier in Victoria. Bowens Pty Ltd has an annual turnover of
$24 million, and works under the accrual method of accounting. Bowens Pty Ltd purchases concrete
mixer for $660 each from Builder’s Choice Pty Ltd, a company in Geelong with an annual turnover of
around $21 million, and works under the accrual method of accounting. Bowens Pty Ltd plans to sell
the concrete mixers at a 200% mark‐up to its customers. In October last year it purchased 110
concrete mixers but in December they discovered that 12 of the concrete mixers were faulty and
subsequently returned these faulty concrete mixers to the manufacturer, obtaining a full refund.
Assume both apply the accrual method of accounting.
With reference to relevant laws, discuss the GST consequences of this arrangement for both Bowens
Pty Ltd and Builder’s Choice Pty Ltd. (10 marks, maximum 400 words).
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