Question 2 Taxation of Partnership 15 Marks

Donald, Ronald and Mick started a supermarket business in Fiji under a partnership agreement stating profit & Loss sharing ratio of 6:3:1. During the financial year of 2020 the following transactions has taken place amounting to:

Sales 3,500,000

Sales Returns 69,050

Purchases 1,560,000

Interest on investment 35 000

Advertising 27,000

Fuel-Motor Vehicle (For vehicles used in business) 18,500

Depreciation (For assets used in business) 35,000

Telephone 14,500

Goodwill Amortized 6 000

Freight Inwards 2 000

Utility 12,000

Rent (For renting the shop space) 130,000

FNPF 55,000

Salaries & Wages 370,000

Discount Received 3 500

Purchase Returns 50 000

Bank Charges 9 000

Interest on mortgage 12,500

Accrued Expenses 5 500

Insurance Premiums 8 000

Miscellaneous Expenses 10,000

Income Tax Payable 15 000

Additional Information

Closing stock 31/12/2020 $107,000

Opening stock 1/1/2020 $45,000

Tax Rate 20%

Donald and Mick are resident of Fiji and Ronald is a non-resident partner.

Required:

1. Prepare the Profit and loss statement of partnership business. (10 Marks)

2. Calculate Tax Liability of each partner for the year 2020. (5 Marks)