Unit: Public Finance and Taxation
15 Questions| Sh. | |
| Sales at standard rate | 1,480,000 |
| Exports to a foreign country | 364,000 |
| Audit fees | 78,300 |
| Electricity bills | 36,400 |
| Imported raw materials | 320,000 |
| Purchases at standard rate | 624,500 |
| Exempt supplies | 700,000 |
| Catering services | 94.000 |
| Entertainment services | 120,000 |
| Telephone bills | 28,000 |
| Car parking services | 50,000 |
| Bottled drinking water for staff | 64,000 |
| Zero rated supplies (exports) | 240,000 |
| Repairs of motor vehicles | 76,200 |
| 1 | Basic salary per month (Net of PAYE of Sh.18,600 per month) Sh.61,400. |
| 2 | He was provided with a house by the employer which was furnished at a cost of Sh.200,000. |
| 3 | He is a member of a registered retirement pension scheme. His monthly contribution was Sh.30,000. The employer contributed Sh.32,000 per month. |
| 4 | He was provided with a company car of 2000 cc whose cost as at 1 January 2019 was Sh.800,000. |
| 5 | He was given per diem of Sh.10,000 for five days he was out of work station on official duties in the month of June 2020. |
| 6 | He is a pensioner and received a monthly pension of Sh.35,000. |
| 7 | He is a member of home ownership savings plan (HOSP) where he contributed Sh.16,000 per month up to 30 September 2020. |
| 8 | On 1 October 2020, he moved to his own house which he acquired through a 12% mortgage loan of Sh.3,600,000. |
| 9 | He has an education insurance policy for his children where he pays premiums of Sh.7,000 per month. |
| 10 | He enjoyed free company products during the year whose value was estimated at Sh.56,000. |
| 11 | The company gave him a 5% loan of Sh.2,000,000 on 1 December 2020 to assist in off-setting the mortgage loan. The market interest rate was at 12% per annum. |
| 12 | The company paid him monthly telephone allowance of Sh.5,000. |
| 13 | His other incomes included:
|
| Sh. | Sh. | |
| Sales | 15,300,000 | |
| Closing inventory | 2,000,000 | |
| Disposal gain on asset sold | 180,000 | |
| Discount received | 300,000 | |
| Compensation from insurance | 105,000 | |
| 17,885,000 | ||
| Less: Expenses: | ||
| Purchases | 9,000,000 | |
| Opening inventory | 1,500,000 | |
| Repairs and maintenance | 528,750 | |
| Rent and rates | 93,750 | |
| Bad debts | 311,250 | |
| Subscriptions and donations | 37,500 | |
| Permits and licences | 150,000 | |
| Depreciation | 670,000 | |
| Office and distribution expenses | 360,000 | |
| Travelling and transport | 252,000 | |
| Legal fees | 327,000 | |
| Accountancy fees | 97,500 | |
| Disposal loss on assets | 180,000 | |
| Discount allowed | 200,000 | |
| Salaries and wages | 1,500,000 | |
| Bank ledger fees | 67,500 | (15,275,250) |
| Net profit | 2,609,750 |
| 1 | Insurance compensation is in relation to communications equipment stolen during the year while being shipped to a client. |
| 2 | Office and distribution expenses comprise of the following: | Sh. |
| Club membership fee subscriptions for employees | 135,000 | |
| Private expenditure of directors | 102,000 | |
| 3 | 10% of the rent and rates relates to directors' private residences. | |
| 4 | Subscriptions and donations include: | Sh. |
| To the communications equipment traders association | 22,500 | |
| To the Kenya Red Cross-donations | 5,500 | |
| To the street children feeding program | 9,500 | |
| 37,500 | ||
| 5 | Legal fees include the following: | Sh. |
| Renewal of lease -100 years | 45,000 | |
| Staff employment contracts | 60,000 | |
| Counterfeit equipment suit in the High Court | 87,000 | |
| Debt collection | 50,000 |
| 6 | Capital deductions have been agreed at Sh.645,000 with the Commissioner of Domestic Taxes. |
| 7 | Bad debts include an increase in general provision for bad debts of Sh.21,250. |
| 8 | Salaries and wages include directors emoluments of Sh.500,000. |
| 9 | Repairs and maintenance includes the cost of erecting a signboard outside the dealership shop of Sh.28,750. |
| Cost (Sh.) | Date of first use | |
| Godown | 320,000 | 1 July 2020 |
| Showromm | 240,000 | 1 September 2020 |
| Administration offices | 680,000 | 1 October 2020 |
| 1 | The following assets were constructed or purchased and utilised with effect from 1 July 2020: |
| 1 | Cost (Sh.) | |
| Water pump | 540,000 | |
| Labour quarters | 920,000 | |
| Processing machinery | 2,600,000 | |
| Tractor | 1,800,000 | |
| Scanners | 320,000 | |
| Two saloon cars | 7,000,000 | |
| Mobile forklift | 1,500,000 | |
| Computers | 250,000 | |
| Power transformer | 820,000 | |
| Office cabinets | 180,000 | |
| Boilers | 960,000 | |
| Bridge (connecting the factory to main road) | 1,200,000 |
| 2 | The following costs were incurred by the company on 1 September 2020: |
| 2 | Cost (Sh.) | |
| Sinking a borehole | 720,000 | |
| Construction of a parking bay | 630,000 |
| 3 | One of the computers traded in on 10 November 2020 for a new one costing Sh.68,000. The trade in value was Sh.40,000 and the balance was settled in cash. |
| 4 | The company constructed a Sports Pavilion and additional staff quarters during the year at the cost of Sh.890,000 and Sh.1,200,000 respectively. These structures were utilised from 1 October 2020. |
| Mawah Enterprises Statement of profit or loss for the year ended 31 December 2020 |
| Sh. | Sh. | |
| Gross sales | 2,736,000 | |
| Unrealised foreign exchange gain | 16,000 | |
| Insurance recovery on stolen good | 300,000 | |
| Overprovision for bad debts | 34,000 | |
| Dividends from Haki Cooperative Society | 42,500 | |
| Interest on drawings | 45,000 | |
| 3,173,500 | ||
| Less expenses: | ||
| General expenses | 324,000 | |
| Legal expenses | 678,600 | |
| Salaries to partners | 450,000 | |
| Drawings by partners | 100,000 | |
| Commission to partners | 180,000 | |
| Interest on partners' capital | 250,000 | |
| Purchase of furniture | 96,000 | |
| Donations to poverty commission | 64,000 | |
| Construction of fire exit | 36,400 | (2,179,000) |
| Net profit | 994.500 |
| 1 | Gross sales include VAT at 14%. In addition, 10% of sales before VAT represents closing stock. The stock had been overstated by 20%. |
| 2 | The amounts due to partners are to be apportioned according to profit or loss sharing ratios. |
| 3 | General expenses comprise: | Sh. |
| Partition of business premises | 64,000 | |
| Debt collection expenses | 36,000 | |
| Purchase of office stationery | 14,000 | |
| Cash embezzled by partner's wife | 48,000 | |
| Bad debts written off | 24,800 | |
| Business premises rent | 31,200 | |
| Salaries to employees | 106,000 | |
| 324,000 | ||
| 4 | Legal expenses include: | Sh. |
| Acquisition of patent rights | 24,800 | |
| Drafting of sales agreement | 34,200 | |
| Negotiating sales contract | 60,000 | |
| Defending the business against trade dispute | 42,600 | |
| Mortgage interest for Mark | 140,000 | |
| Defending partners against wrong tax assessment | 94,600 | |
| Conveyance fees for business premises | 125,800 | |
| Tax consultancy fees | 72,500 |
| 5 | The purchases represent 40% of the gross sales figure Sh.2,736,000. The purchases had been understated by 25% and were omitted from the income statement. |
Want to join the discussion?
Log in to post comments and interact with tutors.
Login to Comment