Question
British American is a resident insurance company carrying out both general and life assurance businesses in Kenya. The following information relates to the insurance companys
British American is a resident insurance company carrying out both general and life assurance businesses in Kenya. The following information relates to the insurance companys financial year ended 31 December 2021:
General insurance
Business
Life assurance
Business
Ksh. 000
Ksh. 000
Insurance premiums received
60,750
96,900
Premiums returned on surrendered policies
8,000
6,000
Re-insurance commission ceded
8,000
-
Premiums paid to re-insurance company
5,000
-
Management expenses
8,400
26,500
Traveling expenses
2,800
3,400
Advertising expenses
364
820
General expenses
8,500
5,600
Bad debts written off (specific)
700
900
Income from exercise of subrogation rights
750
-
Rent and rates
600
450
Staff training expenses
5,000
4,000
Depreciation of equipment
900
3,100
Fines and penalties for late payment of tax
850
3,450
Repairs and maintenance
550
950
Claims recovered on re-insurance
1,750
-
Additional information
1. Reserves for unexpired risk for general insurance business was as follows:
General
Business
Ksh. 000
1 January 2021
5,200
31 December 2021
2,700
2. Claims outstanding were as follows:
General insurance
Life assurance
Business
Business
Ksh. 000
Ksh. 000
1 January 2021
6,600
4,400
31 December 2021
2,200
2,800
3. Claims paid during the year ended 31 December 2021amounted to Ksh. 17,600,000 for General insurance business and Ksh. 16,900,000 for Life assurance business.
4. The life fund balance was estimated to be ksh 180 million out of which the actuary recommended that ksh 84 million to be transferred to the shareholders
5. Income from subrogation ksh 12.8 million.
6. Capital allowances was agreed with KRA at ksh. 6million.
Required:
(i)Determine the taxable income or loss of British American Insurance Company Ltd. for the year of income 2021.(12 marks)
(ii)Tax payable (if any) by the insurance company (3 marks)
British American is a resident insurance company carrying out both general and life assurance businesses in Kenya. The following information relates to the insurance companys financial year ended 31 December 2021:
| General insurance Business | Life assurance Business |
| Ksh. 000 | Ksh. 000 |
Insurance premiums received | 60,750 | 96,900 |
Premiums returned on surrendered policies | 8,000 | 6,000 |
Re-insurance commission ceded | 8,000 | - |
Premiums paid to re-insurance company | 5,000 | - |
Management expenses | 8,400 | 26,500 |
Traveling expenses | 2,800 | 3,400 |
Advertising expenses | 364 | 820 |
General expenses | 8,500 | 5,600 |
Bad debts written off (specific) | 700 | 900 |
Income from exercise of subrogation rights | 750 | - |
Rent and rates | 600 | 450 |
Staff training expenses | 5,000 | 4,000 |
Depreciation of equipment | 900 | 3,100 |
Fines and penalties for late payment of tax | 850 | 3,450 |
Repairs and maintenance | 550 | 950 |
Claims recovered on re-insurance | 1,750 | - |
Additional information
| General |
| Business |
| Ksh. 000 |
1 January 2021 | 5,200 |
31 December 2021 | 2,700 |
| General insurance | Life assurance |
| Business | Business |
| Ksh. 000 | Ksh. 000 |
1 January 2021 | 6,600 | 4,400 |
31 December 2021 | 2,200 | 2,800 |
Required:
(i)Determine the taxable income or loss of British American Insurance Company Ltd. for the year of income 2021.(12 marks)
(ii)Tax payable (if any) by the insurance company (3 marks)
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