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Hbc2123:Introduction To Taxation Question Paper
Hbc2123:Introduction To Taxation
Course:Bachelor Of Commerce
Institution: Meru University Of Science And Technology question papers
Exam Year:2012
QUESTION ONE (30 MARKS) (a) Discuss with illustrations the meaning of tax base. (5Marks) (b) Explain the terms tax burden and its effects. (5Marks) (c) Discuss the role of taxation in achieving budgetary objective. (5Marks) (d) Tax can be shifted forwards, backward and both of the either sides. Discuss. (5Marks) (e) Explain the following terms: (i) Personal relief (ii) Insurance relief (iii) Withholding tax (iv) Set offs (v) Installment tax payment system (5Marks) (f) Explain the benefits of low interest rate with an illustration. (5Marks)
QUESTION TWO (20 MRKS) (a) st December 2008 after it had run 3 years. Compensation of Sh. 1.5 million is paid to the employee and the employees rate of earning as at the date of termination was Sh. 500,000 pa.
Required: Determine the assessable amount of compensation showing clearly the years to which it relate? (10Marks)
(b) Briefly d (10Marks)
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QUESTION THREE (20MARKS) (a) Explain the tax treatment of the following incomes received by a company. (i) Dividend (2Marks) (ii) Interest (2Marks) (iii) Rent (2Marks)
(b) The management of Koromone Ltd has presented the following income statement for the year ended 31st December 2009.
KOROMONE LIMITED Income statement for the year ended 31st December 2009.
Shs. Shs. Gross Profit Other incomes Dividend from Subsidiary Interest from foreign bank a/cs Discounts received Refund from V.A.T Gain on sale of Motor Vehicle 200,000 4,000 28,000 12,000 14,000 5,292,000 258,000 5,550,000 Expenditure Salaries and wages NHIF contribution Subscription and trade association Hire purchase interest Bad Debts written off General expenses Depreciation Legal expenses Insurance premiums Rent Electricity Purchase of furniture 800,000 30,000 50,000 15,000 60,000 80,000 25,000 40,000 124,000 66,000 34,000 26,000 (1,350,000) 4,200,00
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Additional Information:
1. Capital allowances were agreed with the Revenue Authority at Sh. 75,000. 2. Included in bad debts is a loan of Sh. 15,000 due from a farmer employee of the company who was dismissed in October 2009. 3. Legal expenses include Sh. 20,000 incurred in defending a manager against a traffic offence. 4. Insurance premiums include Sh. 24,000 paid to the NHIF as a penalty for late submission of contribution. 5. The company paid stamp duty of Sh. 6,000 relating to a piece of land purchases in August 2009. This payment is included in the rent expense for the year ended 31/12/2009.
Required:
(i) Compute the adjusted taxable profit or loss of Koromone Ltd for the year ended 31/12/2009. (12Marks) (ii) Calculate the tax liability (if any) of the company for that year. (2Marks)
QUESTION FOUR (20 MARKS) (a) What are capital allowances and why are they important? (5Marks) (b) Colombo Co. Ltd. a company dealing in Electronics prepares its accounts to December each year. The following information relates to the year ended 31st December 2009. (i) Written down value of assets brought forward for income tax purpose:- Class 1 Class 111 Class IV 37 ½ % 25% 12 ½ % Written down b/d sh. 175,000 sh. 175,000 sh. 87,000
(ii) Disposals during the year:
Cost (sh) NBU (sh) Sales (sh) ISUZU Lorry 280,000 175,000 260,000 Motor Car (Purchased in 1.3.2009 2,160,000 1,015,000 800,000
(iii) Additions during the year: sh. Mercedes Benz Sports car for director 4,000,000 Second-hand tractor 80,000 Shop fittings 60,000 Computers bought 1/3/2009 250,000 Telephone system 1/9/2008 72,000 Trailer used by Tractor 80,000
Required: Calculate the wear and deductions due to the company for 2009. (15Marks)
QUESTION FIVE (20 MARKS) (a) Discuss the establishment of V.A.Ts. and why it replaced sales tax. (5Marks) (b) Distinguish between exempt and zero-rated supply for VAT purposes. (5Marks) (c) What are the benefits of V.A.T on the context of a good tax system? (10Marks)
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