Question
The management of Santa Limited has presented the following trading and profit and loss account for the year ended 31 December 2021: Ksh. 000 Ksh.
The management of Santa Limited has presented the following trading and profit and loss account for the year ended 31 December 2021:
| Ksh. 000 | Ksh. 000 |
Sales |
| 18,500.00 |
Less cost of sales: |
|
|
Opening Stock | 4,200.00 |
|
Purchases | 5,600.00 |
|
Cost of goods available for sale | 9,800.00 |
|
Closing stock | (2,400.00) | (7,400.00) |
Gross profit |
| 11,100.00 |
Other incomes: |
|
|
Gain on sale of equipment |
| 120.00 |
Interest on savings account (gross) |
| 40.00 |
Divided for a quoted company |
| 80.00 |
Gain on foreign exchange transactions |
| 100.00 |
|
| 11,440.00 |
Expenditure: |
|
|
Goodwill amortization | 25.00 |
|
Legal expenses | 420.00 |
|
Salaries | 2,000.00 |
|
Bad debts | 500.00 |
|
NSSF contribution | 60.00 |
|
General expenses | 600.00 |
|
Advertising | 300.00 |
|
Staff meals | 190.00 |
|
Travelling expenses | 180.00 |
|
Donations to a trade association | 40.00 |
|
Property rates | 45.00 |
|
Depreciation | 150.00 |
|
Interest on long term | 300.00 |
|
Interest on bank overdraft | 80.00 |
|
Insurance premiums | 124.00 |
|
Cost of stolen stock | 20.00 |
|
Provision for bad and doubtful debts | 200.00 |
|
Branch closure costs | 100.00 | (5,334.00) |
Net profit |
| 6,106.00 |
- The closing stock on 31 December 2021 was valued at a cost plus a markup of twenty per cent.
- Legal expenses related to:
| Ksh. |
Preparation of the Memorandum of Association | 150,000 |
Conveyance fees on purchase of land | 60,000 |
Renewal of 89 years lease | 90,000 |
Settling customer disputes | 100,000 |
Acquisition of a bank loan | 20,000 |
| 420,000 |
- Sales (expense) includes:
| Ksh. |
Directors allowances | 720,000 |
Christmas gifts to staff | 600,000 |
Golden handshake to a retiring director | 400,000 |
- Bad debts include
| Ksh. |
Loan to director | 200,000 |
Estimated defaults by trade debtors | 120,000 |
- Advertising expense includes Ksh. 100,000 for a neon sign
- Twenty per cent of the travelling expenses relate to the private usage of company motor vehicles.
- Capital allowances were agreed with the revenue authority at Ksh. 200,000.
Required
- Adjusted taxable profit or loss for Santa Limited for the year ended 31 December 2021.
- The tax payable by Santa Limited (if any) for the year ended 31 December 2021
- Determine the dates when tax computed in (b) above is payable given that the taxable profits for the year ended 31 December 2020 was sh.3,200,000
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