SECTION B

Attempt four of the five questions in this section

Question

1. (a)Explain the following principles of taxation:
2. (i)simplicity.
3. (ii)convenience.
4. (b)Tukolebukozi (U) Ltd is located in Iganga town. Its statement of profit or
5. loss and other comprehensive income for the year ended 31 December, 2017 is as follows:

Sales

Less cost of sales

Gross profit

Other income

Bad debt recovered

Profit on sales of furniture

Less: Operating expenses

Salaries

Staff meals (canteen equal terms) Telephone (10% is for private use) Loss on sale of motor vehicle Water and electricity

Office expenses

Trading license

Generator expenses

Stationery and printing

Director's remuneration

Bad debts written off

Rent

Maintenance

Subscriptions and donations Depreciation

Legal and accountancy fees

Net Profit

Shs '000' 1,400,000 1,220,000

180,000

2,000 200 182,200

11,900 3,100 3,000

204 2,900 2,800 500 1,100 2,300 20,000 2,000 3,200 3,600 1,800 6,000 3,000 114,796

1 June, 2018

Page 2 of 8

(i) (ii) (iii)

1 June, 2018

Input VAT. (2 marks) Output VAT (2 marks) Identify the rates used when registered persons make supplies of goods or services.

(3 marks) Page 3 of 8

Notes:

1. 1Office expenses include the following:
2. Staff travelling expenses (van) 2,300 Entertaining expenses 500
3. 2Maintenance
4. Beatifying the existing premises 600 Renovations of premises to the usable state 3,000
5. 3Legal and accountancy fees
6. Company debt collection services 400 Staff contract agreements 450 50 year lease agreement fees on new premises 650 Accountancy fees 700 Tax consultancy for the director's wife project 800 Total 3,000
7. 4Subscriptions and donations include:
8. Donation to political party 900 Subscription to Uganda Manufacturers Association 500 Trade fair fees 400 Total 1,800
9. 5On 1 January, 2017 the tax written down values of plant and machinery were as follows:

Class 1 Class II Class IV

3,400 14,600 52,000

6 The company purchased the following assets in the year: Photocopier 1 August, 2017. 22,500 Furniture 1 December, 2017 14,400

Required:

Compute the tax obligation for the period ended 31 December, 2017.

(18 marks) (Total 20 marks)

Question 3

(a) Explain the VAT terms below as required by the VAT Act Cap 349:

Shs '000'

(b) For VAT to be levied on a local supply there are four fundamental principles that must be satisfied.

Required:

Identify the four fundamental principles that must be satisfied.

(c) Bonga Ltd is VAT registered company that deals in standard rated goods. During the month of April 2018, the following transactions took place:

April

2 Sold goods worth Shs 20,000,000 inclusive of VAT.

10 Purchased goods of Shs 70,000,000 inclusive of VAT.

10 Sold goods of Shs 15,000,000 exclusive of VAT.

12 Donated goods to Sayuni Babies Home of Shs 25,000,000 inclusive

of VAT.

1. 15Purchased goods worth Shs 7,000,000 exclusive of VAT.
2. 16Sold goods worth Shs 17,000,000 inclusive of VAT.
3. 19Received a telephone invoice from Pax Communications Ltd for Shs
4. 725,000 VAT exclusive for the month March. The company had
5. made a prepayment of Shs 600,000 in the month of March.
6. 20Was contracted and transported goods to Juba in Southern Sudan
7. for shs 60,000,000.
8. 20Sold medical equipment worth shs 40,000,000 to Arus Referral
9. Hospital.
10. 21Sold goods of Shs 35,000,000 exclusive of VAT.
11. 22Purchased goods worth Shs 45,000,000 exclusive of VAT. Shs
12. 10,000,000 worth of goods were damaged before sales were made.

27 Paid for water Shs 50,000 inclusive of VAT.

1. 29Sold goods for Shs 17,000,000 exclusive of VAT.
2. 30Paid rent of Shs 900,000 inclusive of VAT to Property Masters Ltd.

Required:

Compute VAT payable or claimable for the month of April 2018.

(9 marks) (Total 20 marks)

Question 4

1. (a)Explain what industrial building deductions are as per the income tax Act Cap 340.
2. (2 marks)
3. (b)Kampala Arcade Ltd constructed a commercial building on Kampala Road at a cost of Shs 2.5 billion. The building was completed and put to use on 1 October, 2017.
4. Required:
5. Compute the industrial building deductions (IBD) Kampala Arcade Ltd will be entitled to claim for the year ended 31 December, 2017.
6. (4 marks)
7. (c)MadiOpei Ltd constructed a three-storied commercial building at a cost of Shs 1.7 billion in Arua Town. The building was put to use on 1 November, 2017. The company uses part of the third floor for personal work and its construction is valued at Shs 120 million.
8. Note: Assume the year has 365 days.
9. Required:
10. Compute the industrial building deductions (IBD) MadiOpei Ltd will be entitled to claim for the year ended 31 December, 2017.
11. (5 marks)
12. (d)Towa Bus Yako Ltd commenced business in December 2017. Before commencement, it incurred the following expenses:

Land registration Stamp duty Registration of land Registration of company Feasibility

Surveying

Bribe for quick registration

Required:

Shs '000' 16,000 12,000 4,000 20,000 14,000 6,000

Compute the allowable startup costs which Towa Bus Yako Ltd should claim in its tax computation for the year ended 31 December, 2017.

(5 marks) (e) Name and explain any three categories of deductions allowed on capital

expenditure.

(4 marks) (Total 20 mark)

Question 5

(a) (i)

Define the term 'bonded warehouse.

(b) (i)

Define the term re-exportation.

(8 marks)

(2 marks)

(ii) Briefly explain the procedures of licensing of bonded warehouses before approval by the Commissioner.

(ii) Identify goods for re-export which qualify for exemption from import duties as per Section 115 of East African Community Customs Management Act 2004.

(2 marks)

(c) Mention the issues which are looked into during the examination of parcels imported by post.

(6 marks) (Total 20 marks)

Question 6

1. (a)Explain the role of small and medium - size business to the development of an economy.
2. (7 marks)
3. (b)Explain the disadvantages of a partnership form of business ownership.

(c) (i) (ii)

Define the term franchising.

Explain the advantages of franchising to the franchisee.

(7 marks) (1 mark)