Part C Question 1 You a trainee accountant working in a tax department and have been asked to correct a corporation tax computation The computation has been prepared by the director of Kraken Ltd for the year ended 31 March 2020 and contains a substantial number of errors Kraken Ltd Corporation Tax Computation for the year ended 31 st March 2020 Trading Profit (w1) 403,500 Interest received on loan (w2) 34,500 438,000 Corporation tax (438,000 at 19 ) 83,220 Workings 1 Trading Profit Operating profit before interest and taxation 291,450 Depreciation 17,860 Donations to a political party 300 Qualifying charitable donations 1,200 Accounting fees 2,750 Legal fees (issue of loan used to finance trading activities) 6,600 Entertaining suppliers 3,010 Entertaining employees 1,475 Gifts to customers (mugs printed with Kraken Ltd) 680 Gifts to customers (fruit gift baskets) 1,750 Capital allowances (w3) 76,425 Trading Profit 403,500 Loan interest received Loan interest receivable 35,500 Accrued at 1 st April 2019 11,500 Accrued at 31 st March 2020 (12,500) Loan interest received 34,500 The loan was made for non trading purposes Capital allowances Main Pool Motor Car Special Rate Pool Allowances WDV b f 14,600 15,200 Additions Machinery 48,200 Motor car (1) 16,750 Motor car (2) 17,500 79,550 AIA (79,550) 79,550 Disposal proceeds (10,500) 4,700 Balancing allowance (4,700) (4,700) WDA 18 (3,150) X 50 1,575 WDA c f 0 14,350 76,425 Total Allowances Motor car (1) has a CO 2 emission rate of 90 grams per kilometre Motor car (2) has a CO 2 emission rate of 120 grams per kilometre The event manager uses the motor car, and 40 of the mileage is for private journeys All the items included in the special rate pool as of 1 st April 2019 were sold for 10,500 during the year ended March 2020 The original cost of the items was 18,200 Prepare a corrected version of Kraken Ltds corporation tax for the year ended 31 st March 2020 Note Your calculations should start with the operating profit before interest and taxation figure of 291,450, and you should indicate by the use of zero (0) any items in the computation of the trading profit for which there is no adjustment required (12 marks)

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Part C Question 1 You a trainee accountant; working in a tax department and have been asked to correct a corporation tax computation. The computation

Part C

Question 1

You a trainee accountant; working in a tax department and have been asked to correct a corporation tax computation. The computation has been prepared by the director of Kraken Ltd for the year ended 31 March 2020 and contains a substantial number of errors.

Kraken Ltd Corporation Tax Computation for the year ended 31^st March 2020.


Trading Profit (w1)	403,500
Interest received on loan (w2)	34,500
	438,000

Corporation tax (438,000 at 19%)	83,220

Workings

1. Trading Profit

Operating profit before interest and taxation	291,450
Depreciation	17,860
Donations to a political party	300
Qualifying charitable donations	1,200
Accounting fees	2,750
Legal fees (issue of loan used to finance trading activities)	6,600
Entertaining suppliers	3,010
Entertaining employees	1,475
Gifts to customers (mugs printed with Kraken Ltd)	680
Gifts to customers (fruit gift baskets)	1,750
Capital allowances (w3)	76,425
Trading Profit	403,500

Loan interest received

Loan interest receivable	35,500
Accrued at 1^st April 2019	11,500
Accrued at 31^st March 2020	(12,500)
Loan interest received	34,500

The loan was made for non-trading purposes.

Capital allowances

	Main Pool	Motor Car	Special Rate Pool	Allowances
WDV b/f	14,600		15,200
Additions
Machinery	48,200
Motor car (1)	16,750
Motor car (2)		17,500
	79,550
AIA	(79,550)			79,550
Disposal proceeds			(10,500)
			4,700
Balancing allowance			(4,700)	(4,700)
WDA 18%		(3,150)	X 50%	1,575
WDA c/f	0	14,350		76,425
Total Allowances

Motor car (1) has a CO₂emission rate of 90 grams per kilometre.
Motor car (2) has a CO₂ emission rate of 120 grams per kilometre. The event manager uses the motor car, and 40% of the mileage is for private journeys.
All the items included in the special rate pool as of 1^st April 2019 were sold for 10,500 during the year ended March 2020. The original cost of the items was 18,200.

Prepare a corrected version of Kraken Ltds corporation tax for the year ended 31^st March 2020.

Note.

Your calculations should start with the operating profit before interest and taxation figure of 291,450, and you should indicate by the use of zero (0) any items in the computation of the trading profit for which there is no adjustment required.

(12 marks)