Question
Milungu Plc is a manufacturing company listed on the Lusaka stock Exchange(LUSE).The company; which has been trading for many years, prepares accounts to31st December each
Milungu Plc is a manufacturing company listed on the Lusaka stock Exchange (LUSE). The company; which has been trading for many years, prepares accounts to 31st December each year.
During the year ended 31st December 2023, the company had the following
results: K'000 K'000
Gross Trading Profit - 1,990,780
Dividends Received (Net) from Lukupa (Z) Ltd - 221,34 0
Discount Received - 3,650
Bank Interest Received from Luombe(Z) Bank ltd (Gross) - 136,800
Debenture Interest Received from Kateshi Plc (Net) - 40,630
Profit on Disposal of Motor Van (Note 1) - 5,830
Less: Expenses
Salaries & Wages (Note 2) - 506,490
Canteen Expenses - 214,270
Depreciation - 149,050
Legal Expenses (Note 3) - 22,860
Bad Debts (Note 4) - 8,630
Repairs and maintenance (Notes 5) - 94,780
Advertising (Note 6) - 58, 720
Entertainment and Gifts (Note 7) - 50,640
Loss on Disposal of Equipment (Note 8) - 2,750
General expenses (Note 9) - 357,260
Provision for taxation (Note 10) - 180,000
Dividends Paid (Note 11) - 42,000
Transfer to General Reserve - 100,000
Net Profit - (1,787,450)
- 611,580
Notes:
1.Profits on Sales of Motor Van
The company sold a motor Van for K12,800 000 on 18th February 2023. The Van sold was a Toyota Hilux that had been acquired for Kl 9,245,000 in July 2018.
2.Salaries and Wages - K'000
Directors emoluments - 150,610
Salaries & Wages for their employees - 212,080
Theft of money by the Director of Finance who has since been suspended - 40,000
NAPSA Contributions for employees -
32,420
PAYE deductions for employees paid to ZRA - 65,650
Penalty for late remittance of NAPSA Contributions - 5,730
-506,490
3.Legal Expenses
•Drafting employees' service contracts - 2,680
•Recovery of loan from former employees - 3,400
•Breach of Environmental Council of Zambia regulations in disposing
of industrial waste - 5,890
•Defending action in alleged faulty Goods - 4,120
•Legal Fees in connection with issue of shares to increase the company's share capital - 3,950
•Legal fees in connection with the issue of Debentures - 2,820
- 22,860
4. BAD DEBTS ACCOUNT
Bad Debts Account - K'OOO K'OOO
Trade debts written off - 5,710 balance b/f:
Loans to employee written off - 9,000 General provision 4,860 off
Specific provision - 5,990
Balance C/F:
Bad debts recovered - 3,690
General Provision
3,940 Loan to employee recovered - 2,000
Special provision
6,520 Profit and Loss Account - 8,630
•25,170 •25,170
5.Repairs & Maintenance: K'OOO
Replacement of broken office window panes - 5,040
Office Partitioning and painting - 3,970
Redecorating offices - 4,340
Replacement of Floor Tiles - 31,290
Rebuilding part of wall fence which collapsed due to heavy rainfall - 12,080
InitiaI repairs of a recently acquired second hand Mitsubishi Truck - 23,450
Decorating Company premises - 5,760
Clearing the recently acquired land for the construction of new factory - 8,940
-94,870
6.Advertising: - K'OOO
Adverts on National Television - 15,700
Bill Boards - 10,020
Adverts in a local Newspaper - 8,950
Gifts of 200,000 calendars to customers carrying Company Name - 4,930
Mounting Neon Signs - 19,120
- 58,720.
7.Entertainment & Gifts: - K'OOO
Entertaining special foreign suppliers - 18,360
Staff Christmas party - 11,110
Entertaining prominent customers - 13,930
Gifts of Foodstuffs & drinks to potential customers - 7,240
- 50,640
8.Loss on Disposal of Equipment:
The company sold some of its computers on auction sale for Kl3,800,000 on 31st October 2023. The original cost of the computers sold was K26,500,000 acquired in May 2016.
The loss on disposal was charged to the profit and loss Account.
9.General Expenses: - K'OOO
General cleaning expenses - 96,740
Cost of training employees - 120,830
Penalty for late remittance of - 590 Company Income Tax Return - 1,250
Parking fines on company vehicles - 680
Penalty for late VAT Return - 137,170
Sundry allowable expenses - 357,260.
10.Provision for taxation:
This is based on the Total Company Income Tax paid in respect of the year ended 31st December 2022. The amount of company tax already paid under the provisional system of paying tax for the year ended 31st December 2023 is K198,200,000.
11. On 1st October 2023, Milungu plc paid a dividend of K282 Million. The K282,000,000 is the gross amount before deducting tax.
Additional information:
The company is Registered for VAT purposes, and the Sales, purchase and other expenses figures shown in the profit and loss account have been correctly dealt with for the Value Added Tax (VAT) purposes.
The company has employed two (2) handicapped employees, a Receptionist and an Accounts Clerk.
REQUIRED:
Calculate the company' s taxable profits for the charge year 2023 and its tax payable on the profits and dividends for the year under review.
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