Q. 6

Acul Ocolo Ltd's profit and loss account for the year of 30 June 2016 was as follows:

Sales.............................................................................................1,430,000,000

Less cost of sales...........................................................................1,340,000,000

Gross Profit...................................................................................... 90,000,000

Other Income

Bad debt recovered (previously written off) .......... 2,000,000

Profit on sales of furniture ........................................200,000

92,200,000

Less: Operating expenses

Salaries and wages.................................................. 11,900,000

Staff meals (canteen equal terms)...............................3,100,000

Telephone ...................................................................3,000,000

Loss on sale of motor vehicle .....................................1,204,000

Electricity ....................................................................2,900,000

General expenses .........................................................1,800,000

Trading license ...............................................................500,000

Generator expenses .................................................... 1,100,000

Stationery ................................................................... 2,300,000

Director's remuneration ........................................... 20,000,000

Bad debts written off.................................................. 2,000,000

Rent and rates .............................................................3,200,000

Repairs and maintenance ........................................... 2,500,000

Subscriptions and donations .......................................1,000,000

Depreciation ............................................................... 6,000,000

Legal and accountancy fees ........................................1,400,000

Net Profit................................................................ 28,296,000

Notes

General expenses include the following:

Travelling expenses of staff (van) and directors .................1,000,000

Entertaining supplier ........................................................... 800,000

Repairs and maintenance

Redecorating existing premises ............................................500,000

Renovations of premises to remedy the Disrepair

by the previous occupant ....................................................2,000,000

Legal and accountancy charges

Debt collection services ........................................................200,000

Staff service agreements ......................................................250,000

45 year lease on new premises .............................................150,000

Audit and accountancy ...........................................................500,000

Consultancy director's wife project ........................................ 300,000

Total ..................................................................................... 1,400,000

Subscriptions and donations include:

Donation to political party ........................................................500,000

Subscription to UMA .............................................................. 300,000

Fees to trade fare ....................................................................200,000

Total .....................................................................................1,000,000

On 1 July 2015, the tax written down values of plant and machinery were as follows:

Class 1 .....................................................................................1,400,000

Class II ...................................................................................12,600,000

Class IV ..................................................................................48,000,500

The company purchased the following assets in the year:

Computer 1 August 2015..........................................................2,500,000

Furniture 1 December 2015 ...................................................10,400,000

Required

(i)Compute Acul Ocolo Ltd's chargeable income for the year ending 2016(10 mks)

(ii)Show all the workings and narrations where necessary (10 mks)

(Total 20 mks)