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Assignment 1

Matunda Matamu Limited reported sales of Ksh 18,500,000 and a gross profit of Ksh 11,100,000 for the year ended 31 December 2019, with a net profit of Ksh 6,106,000 after accounting for various expenses. However, after adjusting for additional information provided, the adjusted taxable profit is determined to be Ksh 4,276,000, resulting in tax payable of Ksh 1,283,000, which is due in 4 installments on 20 April 2020, 20 July 2020, 20 October 2020, and 20 January 2021.

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136 views2 pages

Assignment 1

Matunda Matamu Limited reported sales of Ksh 18,500,000 and a gross profit of Ksh 11,100,000 for the year ended 31 December 2019, with a net profit of Ksh 6,106,000 after accounting for various expenses. However, after adjusting for additional information provided, the adjusted taxable profit is determined to be Ksh 4,276,000, resulting in tax payable of Ksh 1,283,000, which is due in 4 installments on 20 April 2020, 20 July 2020, 20 October 2020, and 20 January 2021.

Uploaded by

Triila manilla
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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The management of Matunda Matamu Limited has presented the following trading and profit

and loss account for the year ended 31 December 2019:


Ksh. ‘000’ Ksh. ‘000’
Sales 18,500
Less cost of sales:
Opening Stock 4,200
Purchases 5,600
Cost of goods available for sale 9,800
Closing stock (2,400) (7,400)
Gross profit 11,100
Other incomes:
Gain on sale of equipment 120
Interest on savings account (gross) 40
Divided for a quoted company 80
Gain on foreign exchange transactions 100
11,440
Expenditure:
Goodwill amortization 25
Legal expenses 420
Salaries 2,000
Bad debts 500
NSSF contribution 60
General expenses 600
Advertising 300
Staff meals 190
Travelling expenses 180
Donations to a trade association 40
Property rates 45
Depreciation 150
Interest on long term 300
Interest on bank overdraft 80
Insurance premiums 124
Cost of stolen stock 20
Provision for bad and doubtful debts 200
Branch closure costs 100 (5,334)
Net profit 6,106

1. The closing stock on 31 December 2019 was valued at a cost plus a mark up 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

2. Sales (expense) includes:


Ksh.
Directors allowances 720,000
Christmas gifts to staff 600,000
Golden handshake to a retiring director 400,000

3. Bad debts include:

Loan to director 200,000


Estimated defaults by trade 120,000
debtors

4. Advertising expense includes Ksh.100,000 for a neon sign


5. Twenty per cent of the travelling expenses relate to the private usage of company motor
vehicles.
6. Capital allowances were agreed with the revenue authority at Ksh.200,000.

a. Adjusted taxable profit or loss for Matunda Matamu Limited for the year ended 31
December 2019.
b. The tax payable by Matunda Matamu Limited (if any) for the year ended 31 December
2019
c. Determine the dates when tax computed in (b) above is payable given that the taxable
profits for the year ended 31 December 2018 was sh.3,200,000

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