The following information relates to SmartFarm Ltd., a company involved in farming activity. The company
registered and started operations on 1 January 2024:
The company’s statement of profit or loss for the year ended 31 December 2024:
| 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 |
Additional information:
| 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 |
Required:
(i) Compute the investment allowances due to SmartFarm Ltd. For the year ended 31 December
2024.
(ii) Prepare a statement of adjusted taxable profit or loss and tax payable, (if any) for SmartFarm Ltd.
for the year ended 31 December 2024.
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