QUESTION-1

Sports Folks Ltd, incorporated in 1998, is a UK resident company which manufactures a variety of sports goods for the local and overseas markets. The detailed statement of profit or loss for the year ended on March 31 2018 is as follows:

Gross profit 850,900

Loan interest received (Note 1) 11,300

Profit from sale of plant asset (Note 2) 28,000

Income from property (Note 3) 9,000

Bank interest received (Note 4) 1,800 50,100

800,800

Expenses:

Depreciation 27,000

Entertainment (Note 5) 9,200

Gifts (Note 6) 2,600

Professional fees (Note 7) 29,300

Repairs, renewals & maintenance (Note 8) 49,320

Salaries and wages 399,000

Directors remuneration 51,000 (567,420)

Finance cost

Interest payable (18,900)

Profit before taxation 214,480

Notes:

1 Loan interest received

The interest was received from loans to employees and is the amount accrued up to 31 March 2018. All loans were given on market lending rates.

2. A plan item was sold for 150,000 on profit of 28,000. The chargeable gain on sale has been computed to 12,320

3. Income from property is a rental income in respect of a company owned labor accommodation let to an unconnected party. The amount shown is the amount accrued up to 31 March 2018. However, only half of the amount shown has been received by 31 March 2018

4. Bank interest received is in respect of a deposit held for non-trading purposes and is the amount accrued up to 31 March 2018.

5. Entertainment:

Entertaining suppliers 5,600

Entertaining employees 3,600

6. Gifts:

Gifts to customers (pens costing 40 each and displaying companys name) 900

Gifts to customers (food hampers costing 45 each, displaying companys name) 1700

7. Professional fees:

Accountancy fee 16,300

Legal fee in connection of loan 9,500

issued for financing trading activities

Legal fee in connection with fine for breach of 3,500

workplace safety

8. Repairs, renewals & maintenance (Note 8)

Construction of two accommodation 32,400

rooms for security staff

Annual maintenance cost of cooling equipment 8,320

Repairs and maintenance of company cars used 8,600

by employees/directors

9. Capital allowances:

Written down value (WDV) brought forward of main pool is 79,040. Sports Folks Ltd acquired a new machinery item at the cost of 42,319. In addition, company acquired two motor cars with following details:

Motor car (1) purchased second-hand has CO2 emissions of 65g/km for 11,900

Motor car (2) purchased new has CO2 emissions of 110g/km for 15,955

Required:

• Compute trading profits of Sports Folks Ltd for the year ended March 31 2018. Start with the profit before taxation of 165,040 and list all of the items in the statement of profit and loss indicating by the use of a zero (0) any items that do not require adjustment.
• Compute taxable total profits for the year ended March 31 2018?
• Compute Sports Folks Ltd corporation tax liability for the year ended March 31 2018.