Lamek Ltd. is a company engaged in manufacturing business. The following details were extracted from the financial statements of the company for the year ended 31 December 2023:
Statement of profit or loss for the year ended 31 December 2023
| Sh. | Sh, |
| Turnover (inclusive of VAT at the rate of 16%) | | 9,744,000 |
| Profit on sale of motor vehicle | | 260,000 |
| Insurance compensation for stock destroyed by fire | | 374,200 |
| | 10,378,200 |
| Less expenses: | | |
| Purchases | 2,880,000 | |
| New furniture | 400,000 | |
| Salaries and wages | 380,000 | |
| Legal expenses | 420,000 | |
| General expenses | 1,560,000 | |
| Corporation tax | 464,000 | |
| Advertisement | 520,000 | |
| Audit fees | 194,000 | |
| Office rent | 240,000 | |
| Purchased goodwill | 90,000 | |
| Repairs and maintenance | 360,000 | (7,508,000) |
| | 2,870,200 |
Additional information:
| 1 | Purchases were overstated by 20% and includes carriage cost of Sh.20,000 for furniture for use in the business. |
| 2 | Legal expenses comprised: | Sh. |
| Conveyance fees - Company land | 40,000 |
| Defending the company against tax evasion case | 68,000 |
| Registration of trade mark | 42,000 |
| Negotiation of goodwill | 40,000 |
| Renewal of 100-year lease agreement | 36,000 |
| Loan negotiation fees | 74,000 |
| Defending company against trade dispute | 20,000 |
| Negotiating employee salaries with Union | 100,000 |
| | 420,000 |
| 3 | General expenses included: | Sh. |
| General allowance on bad debts | 38,400 |
| Office partitions | 60,000 |
| Purchase of photocopier | 180,000 |
| Purchase of computers | 350,000 |
| Donations to charitable organisations | 124,000 |
| Construction of sewerage plant | 680,000
|
| 4 | Repairs and maintenance included: | Sh. |
| Purchase of metallic doors | 28,200 |
| Purchase of motor vehicle engine | 54,000 |
| Purchase of plastic tank | 60,000 |
| Construction of fire exit | 184,000 |
| | |
| 5 | Advertisement costs include software expenses for office computers at a cost of Sh.190,000. |
Required:
(i) Prepare a statement of adjusted taxable profit or loss for the year ended 31 December 2023.
(ii) Determine corporation tax payable or refundable, assuming total instalment tax paid was Sh.2,084,920
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