Question
Accounts Tax GST
Sept. 15, 2021, 12:56 a.m.
Answer
Hussein, Samwel and Zarika are trading as Horizon enterprises. They share profits in the ratio of 2:2:1respectively. The following is the statement of comprehensive income for the partnership for the year ended 31 December 2011:
Sh.
Sales 8,000,000
Opening inventory 300,000
Purchases 4,000,000
Closing inventory (600,000) (3,700,000)
Gross profit 4,300,000
less:
Salaries 900,000
Repairs and maintenance 100,000
Interest 480,000
Goodwill 198,000
Depreciation 142,000
Mortgage repayment 200,000
Insurance 384,220
Audit fee 315,780
Legal fee 100,000
Equipment purchase 200,000
Rent and rates 180,000 (3,200,000)
Net profit 1,100,000
Additional information
1. Opening inventory and closing inventory were overvalued by 20%
2. Included in interest expense is interest on capital to partners of sh. 180,000. This amount was to be shared in the profit-sharing ratio. The balance of interest relates to an overdraft taken by the partnership.
3. Mortgage repayment relates to Hussein for a loan obtained from a bank to acquire a residential house.
4. The legal fees of sh. 100,000 relate to partner’s private legal issues.
5. Salaries include those paid to partners as follows: Hussein sh. 40,000, Samwel sh. 60,000 and Zarika sh. 100,000.
6. Not include in the accounts were drawings of goods by Zarika costing sh. 40,000.
7. Other income not included in the accounts is rental income sh. 500,000 and dividend income from Ken-golden Co-operative limited of sh. 100,000.
Required
i) A statement of adjusted taxable income for the year ended 31 December 2011(6mks)
ii) A schedule of the allocation of the taxable income to the partners(4mks)
Sh.
Sales 8,000,000
Opening inventory 300,000
Purchases 4,000,000
Closing inventory (600,000) (3,700,000)
Gross profit 4,300,000
less:
Salaries 900,000
Repairs and maintenance 100,000
Interest 480,000
Goodwill 198,000
Depreciation 142,000
Mortgage repayment 200,000
Insurance 384,220
Audit fee 315,780
Legal fee 100,000
Equipment purchase 200,000
Rent and rates 180,000 (3,200,000)
Net profit 1,100,000
Additional information
1. Opening inventory and closing inventory were overvalued by 20%
2. Included in interest expense is interest on capital to partners of sh. 180,000. This amount was to be shared in the profit-sharing ratio. The balance of interest relates to an overdraft taken by the partnership.
3. Mortgage repayment relates to Hussein for a loan obtained from a bank to acquire a residential house.
4. The legal fees of sh. 100,000 relate to partner’s private legal issues.
5. Salaries include those paid to partners as follows: Hussein sh. 40,000, Samwel sh. 60,000 and Zarika sh. 100,000.
6. Not include in the accounts were drawings of goods by Zarika costing sh. 40,000.
7. Other income not included in the accounts is rental income sh. 500,000 and dividend income from Ken-golden Co-operative limited of sh. 100,000.
Required
i) A statement of adjusted taxable income for the year ended 31 December 2011(6mks)
ii) A schedule of the allocation of the taxable income to the partners(4mks)
