Capriots ltd is a seed upgrading company that listed 60% of its issued share capital at the Nairobi Securites Exchange in the year 2019. The busiriess is fully established in Kilifi County. The company accountant has prepared the following projected income statement for the year ended 31 December 2022

Sh.000

Sh.000

Salaries and wages

Rents rates and insurance Painting of new

extensions

Pension

Increase in authorized capital

8,000,000 NO sales 29,000,000

450,0004frofit on foreign exchange --- -- 1,200,000 1,800,000 Premiums on shares issued - 730,000

,600,000 Dividend from a fully owned 1,100,000

subsidiary company 30,000 Interest from KCB Bank (net) 229.500

Legal expenses 1830,00 Insurance recovery 400,000

Bad debts

Subscriptions and 750,000

donations

Bank charges. ,550,000

Depreciatio 450,000

Training expense___ 1,450,000

Interest on 10 year 2,480,000

debentures

Income tax paid 1,350,000

Traveling expenses 670,000

Audit fees 1,835,000

Motor vehicle running 670,000 expenditure

Value of stock vandalized -4,420,000 by mob

Net profit 7,324,500

13,650,000

32,659,500 /

The following information and schedule are attached to the profit and loss Account

1. The interest relates to a debenture which was issued for business expansion

2. Bad debts: include an increase in general provision of sh. 150,000,000 Sh.000

3. Legal expenses: purchase of director's private house 150, 000

Issuing of notices to defaulting debtors 100, 000

Acquisition of copyrights for designs 200, 000

Renewal of lease for 50 years 180, 000

Arranging a mortgage for director , 200, 000

830.000

4. Training expenses-These include ksh. 24,000,000 paid for director's son studying in Singapore. The company intends to employ her after her studies.

5. Pension amounting to ksh. 1,600,000,000 were paid to retired staff.

6. Rents and rates include ksh 80,000,000 paid to the income tax for the previous year

7. Subscriptions and donations include:

Sh.000

Chamber of Commerce and Industry 300,000

Prophet Kabuu's Uhuru Park Crusade 120,000

Flying Doctors Service 50,000

Donations to a political party A 280,000

0,7 000

8. Traveling expenses include business trips to India and Taiwan. 30% of the expenses were used in seeing tourists' attractions.

9. Insurance recovery is in connection with stock burnt down in a fire suffered in the previous year

Required:

The adjusted profits for tax purposes and make any necessary observations. (15 marks)