Unit: Public Finance and Taxation
14 Questions| October 1: | Purchased raw materials from Dubai for Sh.2,981,200 inclusive of import duty at the rate of 25% and VAT at the rate of 16%. The raw materials were transported to business for further processing. The processed goods were later sold on 8 October 2024 at Sh.4,785,000 inclusive of VAT. |
| October 3: | Purchased goods from suppliers for Sh.3,840,000 net of VAT out of which 20% were from unregistered suppliers. |
| October 8: | Paid for audit and accounting services amounting to Sh.290,000. |
| October 12: | Sold goods to a client in Rwanda for Sh.720,000. |
| October 15: | Sold goods on credit to Mamba Traders based in Mombasa for Sh.835,200. Mamba Traders paid Sh.320,000 during the month and the balance to be paid in the following two months. |
| October 20: | Delight Ltd. issued credit notes to the client in Rwanda for defective goods worth Sh.60,000. |
| October..24: | Purchased computers for resale at a hire purchase price of Sh.420,000 exclusive of VAT. Hire purchase interest was Sh.92,000. |
| October 25: | The Directors of the company took goods worth Sh.160,000 from business for their personal use and donated goods worth Sh.240,000 to Neemah Children’s Home. It is the policy of the company not to charge VAT on drawings and donations. |
| October 26: | A customer who was declared bankrupt in May 2024 paid the debt of goods amounting to Sh.100,000 he owed Delight Ltd. Delight Ltd. had claimed a bad debt relief in respect of the debt. |
| October 29: | Purchased goods for cash amounting to Sh.1,240,000. October 30: Paid for the following expenses: |
| October..29: | Sh. | |
| 30,000 | |
| 48,000 | |
| 30,000 |
| 1 | He received a monthly basic salary from Salab Insurance Group Ltd. of Sh.244,800 net of PAYE. The total PAYE deducted during the year amounted to Sh.607,200. |
| 2 | He received a monthly bonus of 20% of his basic salary during the year. |
| 3 | He attended a five day training for investment analysts organised by the professional body. The employer paid Sh.70,000 for his training and also paid a daily subsistence allowance of Sh.14,000 to cater for his expenses while in the training. |
| 4 | He has a life insurance policy where the annual premiums amount to Sh.180,000. He pays 30% of the premiums whereas the balance is paid by the employer on his behalf. |
| 5 | On 1 September 2023, he was provided with a leased saloon vehicle of 2600cc by the employer. The vehicle was acquired in January 2023 at Sh.2,800,000. The employer paid Sh.36,000 per month as lease charges for the vehicle. |
| 6 | Salab Insurance Group Ltd. has a medical cover for all senior management. He was entitled to a maximum cover of Sh.2,500,000 per annum although he utilised Sh.280,000 on medical bills during the year. |
| 7 | He paid subscription fees to his professional body amounting to Sh.18,000 during the year. |
| 8 | He has invested Sh.2,500,000 with Salab Insurance Group Ltd. money market fund. He received interest at the rate of 12% per annum in the year 2023. |
| 9 | His other incomes during the year include:
|
| Sh. | |
| Factory building | 1,800,000 |
| Office within factory building | 800,000 |
| Second hand imported machinery | 4,400,000 |
| Land | 8,000,000 |
| Engineers fee for machine installation | 1,400,000 |
| Parking bay | 900,000 |
| Conveyor belt | 1,400,000 |
| Commercial building | 10,000,000 |
| 44,900,000 |
| 1 | Commercial building cost included cost of showroom and retail shop amounting to Sh.2,800,000 and Sh.3,200,000 respectively. |
| 2 | The factory building cost included a warehouse at Sh.2,200,000. |
| 3 | A building that had been constructed at a cost of Sh.12,000,000 was leased from Juhudi Manufacturers Ltd. for 5 years. Annual lease rentals were agreed at Sh.2,200,000. Adamil Mwemah imported a processing machinery from China at a cost of Sh.5,200,000 and installed it in the building and started operations on 1 January 2023. |
| 4 | To improve the performance of the factory operations, Adamil Mwemah on 1 July 2023 computerised all its operations at a total cost of Sh.15,000,000 out of which 30% related to software cost. |
| 5 | The following assets were also purchased on 1 July 2023: |
| 5 | Sh. | |
| Furniture and fittings | 620,000 | |
| Second hand BMW vehicle | 4,300,000 | |
| 4 Tonnes lorry | 1,800,000 | |
| Backhoe loader | 3,680,000 | |
| Mobile crane | 1,900,000 |
| 6 | Factory staff labour quarters were constructed during the year at a cost of Sh.2,250,000 and put to use from 1 October 2023. |
| Sh. | |
| Trading profit before tax | 76,000,000 |
| Investment income | 16,990,000 |
| Rental income from commercial property | 6,920,000 |
| Leasing of photocopying machine | 1,000,000 |
| 1 | The following expenses were deducted in arriving at the trading profit before tax: |
| 1 | Sh. | |
| Salaries and wages | 1,400,000 | |
| Contribution to retirement fund | 2,000,000 | |
| Depreciation | 4,000,000 | |
| Bank interest | 1,800,000 | |
| Estimated debts (5% of total debts at year end) | 400,000 | |
| Legal and professional fees | 1,080,000 | |
| Repairs and maintenance | 400,000 | |
| Miscellaneous expenses | 1,500,000 | |
| Donations | 1,000,000 | |
| Instalment tax paid | 2,200,000 |
| 2 | Salaries and wages comprised of directors emoluments Sh.3,000,000, salary to directors domestic servants Sh.1,400,000 and salary to other staff Sh.5,000,000. |
| 3 | Bank interest include that of an overdraft taken by a senior manager of Sh.400,000 and mortgage interest for a director’s house Sh.600,000. |
| 4 | Legal and professional fees comprised of: |
| Sh. | ||
| Recovery of trade debts | 200,000 | |
| Renewal of lease - 100 years | 30,000 | |
| Tax penalties and interest | 500,000 | |
| Tax consultancy fees on tax appeals | 300,000 | |
| Directors loan collection | 50,000 | |
| 1,080,000 |
| 5 | Miscellaneous expenses include staff end of year party Sh.170,000 and parking fines Sh.30,000. |
| 6 | Donations were towards political campaign kitty. |
| 7 | Wear and tear allowance was agreed at Sh.2,800,000 for the year 2023 with the revenue authority. |
| 8 | Investment income comprised of: |
| 9 | Interest income: | Sh. |
| Fedha Bank (K) Ltd. | 2,760,000 (Gross) | |
| Fixed deposit in Lubandah Bank in Uganda | 4,930,000 (Gross) | |
| Sanlam money market fund | 3,400,000 (net) | |
| Dividend income: Dell Co. Ltd | 4,000,000 (net) | |
| Dividend income:Mtandao Cooperative Society | 1,900,000 (net) | |
| 16,990,000 |
| 9 | Rental income was arrived at after deducting the following expenses: |
| 9 | Sh. | |
| Mortgage interest | 400,000 | |
| Water meters installation | 860,000 | |
| Staff salaries | 720,000 | |
| Replacement of iron sheets roofs with roofing tiles | 2,400,000 |
Want to join the discussion?
Log in to post comments and interact with tutors.
Login to Comment