UNIVERSITY OF NAIROBI

MOMBASA & KISUMU CAMPUS

DAC $212$: PRINCIPLES OF TAXATION

CONTINUOUS ASSESSMENT TEST TWO

INSTRUCTIONS

Attempt all questions.

Show your workings.

QUESTION ONE

Sponex Limited deals in a wide variety of low$-$price sports goods. Shown below is a list of transactions for the month of June $2016.$

June $2$

June $3$

June $4$

June $9$

June $11$

June $12$

June $16$

June $19$

June $21$

Purchased goods on credit from Marun Shoes of Sh$\mathrm{.}96,000$

Paid freight charges of Sh$\mathrm{.}2,450$ on the shipment of goods purchased from Manrun Shoes

Upon unpacking the goods from Manrun Shoes, discovered that some of the shoes were the wrong style. Returned those shoes which cost Sh$\mathrm{.}4,000$ to Manrun Shoes and received full credit.

Sales made on account to Ripa Sports for Sh$\mathrm{.}141,000$

Paid Sh$\mathrm{.}2,200$ freight charges on the shipment to Ripa Sports.

Paid Marun Shoes in full

Made credit sales to Holiday Sports for Sh$\mathrm{.}27,550$

Received payment in full from Ripa Sports.

Holiday Sports returned goods worth Sh$\mathrm{.}6,500$

All transactions were subject to Value Added Tax where applicable. The rate of VAT is $16\%.$

Required:

Sportex Limited Value Added Tax Account for June $2016(15$ Marks$)$

QUESTION TWO

The Gitoro Food Processing Industries Ltd$.$ commenced business on $1$ January $2015$ and the following are the fixed assets of the company which it acquired prior to the commencement of the business:

Sh$.$

Conveyer and sorter $($installed in the buildings$)$

Packaging machine

Milling machine

Crashing machine

Fork lifts

Farm tractors

Lorry

Saloon car

Delivery van

Furniture, fittings and partitions

Land at cost

$3,120,000$

$2,625,000$

$2,580,000$

$2,760,000$

$1,290,000$

$5,850,000$

$1,800,000$

$585,000$

$1,350,000$

$408,000$

$15,000,000$

The building in use was constructed at a cost of Sh$.10,200,000$ but its value after construction was estimated at Sh$\mathrm{.}12,600,000$ by a professional valuer. In year $2016,$ the company bought the following assets:

Sh$.$

Tractor

Lorry

Toyota$-$Land$-$Cruiser

Furniture

Partitions

Land

$3$ computers

$2,655,000$

$3,900,000$

$2,025,000$

$210,000$

$408,000$

$4,680,000$

$450,000$

The following assets were disposed off in Year $2016$:

Forklift $360,000$

Saloon car $690,000$

Required:

Compute the capital allowances for the company for the years $2015$ and $2016.(15$ marks$)$