Question Two Maina, Njoka and Otieno are in partnership sharing profits and losses in the ratio of 3:1:1 respectively. For the year ended 31 December 2019, they presented the following trading and profit and loss account. Sh. Sh. Sales Cost of sales: Opening stock Purchases Closing stock Gross profit Other operating income Expenses: Salaries and wages Rent Advertisement Transport Depreciation Interest on partners' capitals Commissions paid to partners Printing and stationery Repairs and maintenance Postage and telephone Legal fees Insurance Gifts Net profit 2,200,000 4,000,000 (800,000) 2,500,000 40,000 120,000 60,000 75,000 450,000 90,000 144,000 380,000 17,000 23,000 110,000 4,000 13,000,000 (5,400,000) 7,600,000 400,000 8,000,000 (4,013,000) 3,987,000 Additional information: 1. Opening stock and closing stock have each been understated by 10% 2. Other operating income includes Sh. 50,000 related to gain on sale of furniture. 3. Salaries and wages include salaries to Maina, Njoka and Otieno of Sh. 300,000, Sh. 250,000 and Sh. 50,000 respectively for the year ended 31 December 2019. 4. Transport costs include Sh. 18,000 paid to Otieno on account of a private trip. 5. Interest on partners' capitals and commissions paid to partners are to be apportioned equally to the partners. 6. The gifts were given to the staff of the firm during the end of year party. 7. Capital allowances due to the firm for the year ended 31 December 2019 were agreed at Sh. 120,000. Required: (i) The partnership's adjusted profit (or loss) for tax purposes for the year ended 31 December 2019. (ii) Distribution of the taxable profit (or loss) between the partners as at 31 December 2019.