1. Tarime Ltd acquired an equipment costing sh. 14.4 million on January 1, 2005 and will be used for 3 years after which it can be sold for shs. 6.05 million. The equipment is to be depreciated. 33¹/₃% on straight line basis while KRA capital allowances are 25% on reducing balance basis. Assuming that profit for the year after charging depreciation amounted to Shs. 3 million.

i) Compute the timing differences for each of the three years. (10 marks)

ii) Compute and compare profits as per financial statements and profits for

tax purpose over the life of the equipment. (Show your workings to

accompany the answers). (5 marks)