Question
Question 1 Fluffy Ltd, an unquoted trading company, changed its accounting date from 31 December to 31 March by preparing accounts for the fifteen months
Question 1
Fluffy Ltd, an unquoted trading company, changed its accounting date from 31 December to 31 March by preparing accounts for the fifteen months to 31 March 2021. Its net profit for those fifteen months was 700,411 after accounting for the following items:
Note
Profit on the sale of shares (1) 51,577
Profit on sale of factory (2) 431,500
Bad debt provision (3) 45,000
General expenses (4) 47,000
Depreciation (5) 90,000
Notes:
- The profit on the sale of shares relates to 20,000 shares in Scarey plc that were sold for 82,000 in February 2021. The shares had been acquired as follows:
10,000 shares bought for 12,000 in May 1991
Scarey plc made a bonus issue of 1 for 10 in June 1998
10,000 shares bought for 22,000 in November 1999
- Fluffy Ltd sold its factory for 612,900 on 1 March 2021. The factory had cost 225,000 when purchased new in October 2005. It had been used exclusively to manufacture Fluffy Ltd's products since its acquisition. Plant and machinery were sold together with the factory. The purchaser paid a further 86,500 (original cost 172,000) for this plant and machinery. This P&M was included in the WDV b/f in the main pool. Fluffy Ltd leases its other two factories.
- Bad debts are made up of:
Debts written off - trade 15,000
Increase in general provisions 30,000
- General expenses include:
Gifts to customers (100 food hampers) 5,000
Entertaining customers 2,600
Staff Christmas party (50 people) 2,000
Parking fines paid for employees 700
- The plant and machinery capital allowance computation for the CAP y/e 31/12/19 provided the following carried forward values:
General/main pool 145,000
Short-life asset pool 10,000
Analysis of the accounts reveals that the following assets were acquired or disposed of during the 15 month period.
May 2020 Acquisition of a delivery van costing 12,000
June 2020 Disposal of the short-life asset for 11,000
Feb 2021 Acquisition of new low emission car 15,000
Mar 2021 Acquisition of a new Audi for 35,000 (emissions 200 g/km)
- The following indexation factors are available:
May 1991 November 1999 0.249
November 1999 December 2017 0.668
October 2005 December 2017 0.439
Required:
Please note: Marks will be allocated for presentation and layout. Annotate and label all workings
Calculate the Corporation Tax payable for the total period ended 31 March 2021.
CORPORATION TAX
Augmented Profits Corporation Tax rate Corporation Tax rate
Financial Year 2019 Financial Year 2020
(1.4.2019 to 31.3.2020) (1.4.2020 to 31.3.2021)
All Profits Main Rate 19% Main Rate 19%
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started