Question 6 Robik Ltd

Robik Ltd is a Cyprus resident manufacturing company. The companys summarised statement of profit or loss for the year ended 31 December 2015 is as follows:

	Notes
Gross profit			560.000
Less: Operating expenses
Depreciation	1	45,560
Patent royalties paid	2	12,500
Office rent		24,000
Irrecoverable receivables (debts)	3	29,000
Gifts and donations	4	6,215
Professional fees	5	30,950
			(148,225)
Operating profit			411,775
Less: Finance costs	6		(12,650)
Profit before taxation			399,125

Notes:

1. Depreciation

The relevant capital allowances for tax year 2015 are 35,850.

2. Patent royalties comprise:

Accrued at 31 December 2014	(3,600)
Paid on 31 October 2015	10,500
Accrued at 31 December 2015	5,600
	12,500

3. Irrecoverable receivables (debts) comprise:

Trade receivables (debts) written off	12,500
Increase in the general allowance for irrecoverable debts	16,500
	29,000

4. Gifts and donations comprise:

Gifts to customers (coffee cups costing 5 each and displaying the companys name)	5,550
Donation to a local football club	65
Donation to an approved charity	600
	6.215

5. Professional fees comprise:

Legal fees in connection with the issue of share capital	5,550
Legal consultants annual retainer fee	10,000
Accountancy and audit fees	15,400
	30.950

6. Finance costs

Interest in respect of a debenture loan which had been used for trading purposes of 12,650 was paid on 31 December 2015.

Required:

Calculate Robik Ltds taxable profit and corporation tax liability for the year 2015.

Notes:

1. Your computation should commence with the profit before taxation figure of 399,125 and should list all the items referred to in notes (1) to (6), indicating by the use of zero (0) any items which do not require adjustment.