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AmBank Ltd. Is a company incorporated in Kenya? The company controls 80% ED 210 Ltd. This is also incorporated in Kenya. The following is a

  1. AmBank Ltd. Is a company incorporated in Kenya? The company controls 80% ED 210 Ltd. This is also incorporated in Kenya.

The following is a statement of comprehensive income of AmBank Ltd. For the year ended 31 December 2015.

Sh.

Sh.

Gross Profit

56,400,000

Less:

Depreciation

4,640,000

Legal expenses

484,000

Loan expenses

780,000

Electricity

360,000

Salaries and wages

8,940,000

Telephone

340,000

Patent royalties paid

720,000

Travel expenses

784,000

17,012,0000

39,388,000

Other income:

Patent royalties received

2,640,000

Loan interest received

2,640,000

Dividend received ED 210 Ltd.

5,360,000

8,184,000

Net Income

47,572,000

Additional Information

  1. The loan interest comprised the following:

Interest of sh. 272,000 relating to a loan acquired to purchase office equipment.

Interest of shs. 246,000 relating to a loan used to acquire shares of ED 210 Ltd.

  1. Salaries and wages include passages of sh. 960,000 paid to a director who relocated to Botswana.
  2. Travel expenses include sh. 148,000 paid to a new employee hired from Cameroon.
  3. The loan interest received relates to a loan issued to an employee of the company to purchase a residential house.
  4. Not included in income was rent received of sh. 1,560,000 from a lease, gross of a loss of shs. 378,000 made on another lease.
  5. An operating loss of sh. 180,400 had been carried forward from the year ended 31 December 2014. The loss was included with salaries and wages expense as at 31 December, 2015.
  6. Royalties of sh. 138,400 were due for receipt as at 31 December 2015 but had not been recorded in the books.
  7. Legal expenses included:

Shs. 168,000 paid on disposes of some property and equipment.

Shs. 74,800 incurred in defending the company against a claim for breach of contract.

Shs. 46,000 incurred in debt collection.

  1. Patent royalties received were from ED 210 Ltd while those paid were to a Ugandan Company.
  2. Capital allowances for the year ended 31 December 2015 were agreed with the Commissioner at Sh. 840,000.

Required:

  1. A statement of adjusted taxable profit or loss for the year ended 31 December 2015. (13 marks)
  2. A schedule showing the final tax payable on or before the sixth month after the end of the accounting year if the tax liability for the year ended 31 December 2014 was sh. 25,000,000. ( 3 marks)

(Total: 25 marks)

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