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Hba2302:Advanced Taxation Question Paper

Hba2302:Advanced Taxation

Course:Bachelor Of Commerce

Institution: Meru University Of Science And Technology question papers

Exam Year:2012

QUESTION ONE (a) Distinguish between Direct and Indirect Tax. (5Marks) (b) (2Marks) (c) Name and briefly explain four items which may be included in the qualifying expenditure for the purpose of investment deduction. (8Marks) (d) Meru Maize Millers Company purchased a building on 1st Janury 2010 for Sh. 4,000,000 and brought the building to use on the same day. The sellers construction cost comprised of: Land Sh 200,000 Architects fees 40,000 Leveling land 60,000 Building cost (including offices Sh. 160,000) 1,700,000 2,000,000
Mafuko Ltd purchased the whole of Meru Maize Millers Company on 1st January 2011 and continued with the same business. The following amounts were paid for assets purchased.
Shs.
Goodwill 10,000
Land & Building 4,000,000
Milling Machines 1,800,000
Tractor & Lorry 1,600,000
Motor Vehicle 1,200,000
2
Mafuko Ltd incurred the following additional costs:
Shs.
Extension to building 800,000
Security wall 100,000
Boiler 1,000,000
Conveyor 1,200,000
Fixtures and fittings 600,000
The company sold some of the assets as follows:- Date Details Sus
1/7/2011 Milling machines 200,000
1/9/2011 Fixtures and fittings 8,000
1/9/2011 Lorry 180,000
The financial year of Mafuko Ltd ends on 31st December.
Required: Capital deductions claimable for the year ended 31st December 2011. (15Marks)
QUESTION TWO
Mutuma Mutwiri deals in a variety of low priced sports goods. The following transactions took place during the month of June 2011.
2nd Purchased goods on credit from marun Shoes sh. 96,000
3rd Paid freight charges sh. 2,450
4th Returned shoes to marun which were found to be damaged valued sh. 4,000
9th Credit sales to Ripa sports ltd sh. 141,000
11th paid sh. 2,200 freight charges on the shipment to Ripa Sports Ltd.
12th Paid marun shoes in full
16th Made credit sales to Holiday Spots sh. 27,550
3
19th Received payment in full from Ripa Sports
21st Holiday sports returned goods worth sh. 6,500
All transactions are inclusive of VAT where applicable.
Required: (a) VAT account (18Marks)
(b) State the dates when VAT due is payable. (2Marks)
QUESTION THREE R S & T former schoolmates of MUCST started a business and registered themselves as equals. The following is their profit and loss account for the year ended 31st December 2011.
Establishment expenses 800 Gross profit 1908 Rent 180 Sundry receipts 80 Interest expenses 80 Interest income 72 Stationery & Printing 120 Profit on sale of success 200 Light & Heating 40 Income from farming 340 General farm expenses 294 Lottery Winning 800 Repair of premises 40 Dividends (Gross) 120 Depreciation 300 Interest on capital R 80 T 120 Salary S 160 Commission: R 96 S 96 T 96 Bad debts 240 Gifts and charity 40 Donation to child welfare 200 Interest on Loan taken to pay income tax 20 Legal charges 120 Net Profit 398 3,520,000 3,520,000
4
Additional Information 1. Capital allowances have been agreed as follows: Wear and Tear Sh. 180,000 Farm works deductions Sh. 120,000 2. The partners had borrowed Sh. 400,000 with a hope of investing in fixed securities. Interest expense of Sh. 80,000 and interest income of Sh. 72,000 relate to the loan. 3. Legal charges include sh. 40,000 paid to finish a case in the Customs Department. 4. In 2011 the partners brought forward losses amounting to sh. 800,000 from this business.
Required (a) Compute Taxation Income derived from the partnership. (15Marks) (b) Show allocation among partners. (4Marks) (c) Comment on the results of (a) above (1Mark)
QUESTION FOUR Write short notes on the following terms appearing in the respective tax legislation. (a) Excise duty (b) Local committee (c) Bonded warehouse (d) Taxable person (e) Designated primary SACCO (f) Zero-rated (g) Non resident (h) Exempt income (i) Hosp. (j) Commercial vehicle (2Marks each)(Total: 20Marks)
5
QUESTION FIVE Mwenda Wa Kiraitu is a businessman who has not been keeping proper books of accounts since 2002. The following balances relate to his business for the period 2002 to 2007.
Details 2002 2003 2004 2005 2006 2007 Land 15 15 15 15 15 15 Lorries 5 7 4 3 6 6 Saloon cars 2 2 2 2 2 2 Swimming pool 0.8 0.8 0.8 0.8 0.8 0.8 Stocks 1.2 2.3 2 1.8 1.8 1.4 Computers 0.5 0.5 0.5 0.4 0.4 0.4 Bank A/C 0.4 0.3 0.02 0.02 0.02 0.02 Business deposit A/C 2.2 2.2 2.2 2.2 2.2 2.2 Treasury Bills 3 3 3 4.5 4 3 Debtors 0.2 0.15 0.25 0.3 0.28 0.52 House Mortgage - - - 7 7 7 Creditors 0.34 - - 0.4 - - Bank overdraft 0.02 0.06 0.08 0.12 0.16 0.2 Interest on bank deposit 0.01 0.005 0.008 0.007 0.0006 0.003 Loss on sale of investment 0.15 0.12 - - 0.2 0.16 Gain on foreign exchange 0.05 0.06 0.04 0.03 0.02 0.01
Required: (a) Estimate the taxable income for each of the 3 years 2005, 2006 and 2007. (16 Marks)
(b) Itemise and briefly explain four other information which may be required in assessing the tax liability of the tax payer. (4Marks)

Hba2302:Advanced Taxation Question Paper

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