Question 1 Mrs. Jenny Foster decided to operate a business Nix & Nax Enterprise. In 2015 she decided to convert a building she owned into a hardware annex to her house and started operations in January 2016. It is now 2020 and Mrs. Foster consulted your accounting firm- Global Accurate Accounting Services to compute her tax liability and prepare her tax returns for the year of assessment 2020. She was able to provide the following details:

Net Profit 4,498,500

General expenses 700,000 Telephone & internet 36,000 Wages & Salaries 484,000 Property tax 20,000 Water 24,000 Electricity 120,000 Depreciation 230,733 Bad debts 20,000 Penalty and interest- property tax 4,000 Business signage expense-Parish council 2,000

Foster provided Additional information: i. Donations were made to: a. A local church $5,000 (not on the TAJs List of Approved Charities) was not recorded b. Mustard Seed Childrens home $15,000 an approved charity was not recorded in the accounts

ii. Salaries include $360,000 for my son Julian who works in the business. The Commissioner-General regards 100% as commensurate with his service provided to the business iii. General expenses include my pay of $10,000 per week and my household helper $6,300 per week. She works 40% of the time in the hardware iv. Bad debts include: $10,000 owed by Princeton Prep School, $10,000 for a percentage of receivables at year-end that are bad v. General expenses include insurance costing $24,000, however $10,000 relates to the house

vi. In terms of certain expenses, I apportion them as follows with regards to the house: a. Water 60% b. Electricity 40% c. Telephone 60% d. Taxes 50% vii. Capital allowances a. initial $37,500 b. annual $112,500

Required: A. Prepare the adjusted Profit and loss statement for taxation for the year of assessment 2020 with applicable notes. B. Prepare the annual returns of income tax payable for the year of assessment 2020.