Question 19: Walton Ltd runs a small printing business and the managing director wishes to know the amount of the company's tax adjusted trading profit for the year ended 31 December 2020. You are presented with the following statement of profit or loss for Walton Ltd, for the year ended 31 December 2020. 66,867 2,850 4,380 1,370 6,500 Gross profit from trading Gift and Donation (Note 1) Depreciation -> disallowable Light and heat-> allowable Professional fees (Note 2) -> allowable Motor car expenses (Note 3) Rates -> allowable Repairs and renewals (Note 4) Staff wages (Note 5) Telephone > allowable Profit before tax Notes: (1) Gifts and donations 555 1,057 2,480 12,124 351 (31,667) 35,200 Donation to a national charity 1,800 Donation to local charity (Walton Ltd received free advertising in 50 the charity's magazine) Gifts to customers (food hampers costing 35 each) 1,000 - Gift to customers: allowable 2,850 + allowable Legal fees the renewal of a 20-year property lease-> allowable Disallowable if legal expenses incurred on the initial granting of the lease are disallowable: thu ln u tin - disallowable, cn thu v gia hn hp ng tip theo - allowable (3) A director uses the motor car 75% for business purposes and 25% for private purposes. (4) Repairs and renewals comprise the following expenditure: Redecorating administration offices -> repair office -> allowable 4,100 2,400 6,500 833 Building extension to enlarge paper store ->improvement -> disallowable 1647 2480 (5) Staff wages includes an amount of 218 for a staff Christmas lunch. Required: Calculate Walton Ltd's tax adjusted trading profit before capital allowances for the yle 31 December 2020. (20 marks) Your computation should commence with the profit before tax figure of 35,200 and should list all the items referred to in notes 1 to 5, indicating by the use of a zero (0) any items that do not require adjustment. Profit before tax 35,200 Add back: Donation to a national 1,800 charity (Note 1) Add back: Gifts to customers (food 1,000 disallowed) Add back: Depreciation 4,380 Add back: Light and heat 0 Add back: Accountancy and audit fee 0 Add back: Motor car (Note 2) Add back: Rates 0 0 Add back: Redecoration (Note 3) Add back: Extension fees (Note 4) 0 1,647 Add back: Staff wages (Note 5) 11,906 0 55,933 Add back: Telephone Adjusted trading profit before capital allowance Note 1: Charitable donations to a national charity made by a company are disallowed as trading expenditure but are deductible when calculating TTP. Note 2: Motor car expense are allowable for the company, although the director will be taxed on the private use of the car as an employment benefit. Note 3: Redecorating administration offices, which recognizes as a revenue expenditure, is allowable. Note 4: The cost of extension to the office building is not allowable. Note 5: The expenditure on the Christmas lunch is an allowable deduction for the employer => The staff wages which is disallowable (12,124 - 218) 11,906