Unit: Public Finance and Taxation
15 Questions| Sh. | |
| Sales at standard rate | 9,810,816 |
| Purchases at standard rate | 6,521,984 |
| Exports to Zambia | 400,000 |
| Exempt sales | 250,000 |
| Stationery | 23,200 |
| Audit fees | 174,000 |
| Catering expenses | 69,600 |
| 1 | Basic salary of Sh.198,000 per month (PAYE deducted Sh.44,600 per month). |
| 2 | He is provided with an accommodation by the employer where he contributed Sh.8,000 towards house rent. The house was connected with a telephone line where the average bill per month amounted to Sh.7,200. The telephone bill is paid by the employer. |
| 3 | He is a member of a registered pension scheme, where he contributed Sh.30,000 per month towards the scheme, with the employer contributing similar amount. |
| 4 | He was provided with a motor car a Land Cruiser of 3500cc whose cost as at 1 January 2024 was Sh.2,400,000. |
| 5 | The house provided by the employer was fully furnished at a cost of Sh.380,000. |
| 6 | On 1 October 2024, he moved into his own private residence, which he had acquired on a 15% mortgage loan of Sh.6,000,000 on 1 April 2024. |
| 7 | On 1 April 2024, he obtained an insurance policy for his children’s education at a monthly premium of Sh.8,000. |
| 8 | He was out of his work station for five (5) days in the month of September 2024 on official duties. The employer paid him a per diem of Sh.4,700 per night. |
| 9 | His other incomes included:
|
| 10 | Assume the following in computation of taxable income and tax purposes:
|
| Income | Sh. | Sh. |
| Sale of poultry | 3,200,000 | |
| Sale of livestock | 4,400,000 | |
| Sale of milk | 3,450,000 | |
| Sale of manure | 560,000 | |
| Sale of sugarcane | 1,456,200 | |
| Discount received | 180,000 | |
| Dividend received (net) | 530,000 | |
| Insurance claim | 3,120,800 | |
| 16,897,000 | ||
| Expenses: | Sh. | Sh. |
| Cost of seeds | 670,000 | |
| Cost of cane tubers | 3,860,000 | |
| Salaries and wages | 1,250,000 | |
| Depreciation for the year | 120,000 | |
| Cost of billboards | 250,000 | |
| Machine repairs | 620,000 | |
| Mulching costs | 50,000 | |
| Animal vaccines | 28,000 | |
| Installment tax paid for the year | 200,000 | |
| Directors emoluments | 1,500,000 | |
| Legal fees | 960,000 | |
| Pesticides | 12,900 | (9,520,000) |
| 7,376,100 |
| 1 | Dividend received from: | Sh. |
| Ukulima Co-operative Ltd | 340,000 | |
| Waridi Ltd. | 190,000 | |
| 530,000 | ||
| 2 | Legal fees comprised the following: | |
| Parking fines | 120,000 | |
| Debt collection from customers | 360,000 | |
| Stamp duty on land | 480,000 | |
| 960,000 |
| 3 | Insurance claim relate to compensation from insurance company for the loss of crops through floods during the year. |
| 4 | Machine repairs include Sh.184,000 spent on purchasing of farm machines during the year. |
| 5 | The company had the following assets at the commencement of the farming activity: |
| 5 | Asset | Cost (Sh.) |
| Solar panels | 140,000 | |
| Computers | 420,000 | |
| Chicken shed | 188,000 | |
| Furniture | 250,000 | |
| Dog kennels | 230,000 | |
| 2 tractors | 8,900,000 | |
| 2 saloon cars | 6,800,000 | |
| Irrigation networks | 410,000 | |
| 3 pick-up motor vehicles | 6,600,000 | |
| Farmhouse | 3,240,000 |
| 6 | A cattle dip and silo were constructed at a cost of Sh.860,000 and Sh.620,000 respectively and put into use from 1 October 2024. |
| 7 | The following assets were acquired on 1 July 2024 |
| Sh. | ||
| Delivery van | 2,200,000 | |
| Loose tools | 120,000 | |
| Wheelbarrows | 360,000 |
| Sh. | Sh. | |
| Gross profit | 29,600,000 | |
| Profit on disposal of furniture | 324,000 | |
| Foreign exchange gain | 180,000 | |
| Insurance compensation for stolen motor vehicle | 2,093,800 | |
| Interest from fixed deposits - Foreign accounts | 150,000 | |
| Dividends from investment (gross) | 200,000 | |
| 32,547,800 | ||
| Less expenses: | ||
| Salaries and wages | 9,340,000 | |
| Interest on capital: | ||
| Interest:Wambua | 180,000 | |
| Interest:Baraza | 250,000 | |
| Legal expenses | 1,720,000 | |
| Conveyancing fees | 128,200 | |
| Purchase of office equipment | 360,000 | |
| Stamp duty on lease agreement (100 years) | 84,000 | |
| Depreciation | 736,000 | |
| General allowance for bad debts | 145,800 | |
| Partner’s medical expenses | 52,400 | |
| Donation to a non-charitable organisation | 35,000 | (13,031,400) |
| Net profit | 19,516,400 |
| 1 | The reported gross profit includes value added tax (VAT) at the rate of 16% on sales amounting to Sh.6,960,000. |
| 2 | Legal expenses included: | Sh. |
| 124,800 | |
| 832,000 | |
| 328,000 | |
| 230,000 | |
| 205,200 |
| 3 | Salaries and wages include salaries to Wambua and Baraza of Sh.400,000 and Sh.600,000 respectively. |
| 4 | Wambua made drawings of Sh.248,000 with interest on drawings of Sh.15,000 being included in the interest from fixed deposits. |
| 5 | General allowance for bad debts included bad debts written off of Sh.34,600. |
| 6 | Commission paid to Baraza of Sh.80,000 was completely omitted from the books of the firm. |
Required: | |
| (i) | Prepare a statement of adjusted taxable profit or loss for the year ended 31 December 2024. |
| (ii) | A schedule of allocation of taxable income for each partner for the year ended 31 December 2024. |
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