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Cfm 300 Advanced Taxation Question Paper

Cfm 300 Advanced Taxation

Course:Bachelor Of Commerce

Institution: Kca University question papers

Exam Year:2011

UNIVERSITY EXAMINATIONS: 2011/2012
YEAR III EXAMINATION FOR THE BACHELOR OF COMMERCE
CFM 300 ADVANCED TAXATION (SATURDAY)
DATE: APRIL 2012 TIME: 2 HOURS
INSTRUCTIONS: Answer ALL Questions
RATES OF TAX- Year of Income 2011
Monthly taxable pay Annual taxable pay Rates of tax
(Shillings) (Shillings) % in each shilling
1 - 10164 1 -121968 10%
10165 - 19740 121969 - 236880 15%
19741 - 29316 236881 - 351792 20%
29317 - 38892 351793 - 466704 25%
Excess over 38892 Excess over -466704 30%
Personal relief Ksh.1.162 per month (Ksh.13,944 per annum)
Prescribed benefit rates of motor vehicles provided by employer
Monthly Annual
Rates rates
(Ksh) (Ksh)
Capital allowances:
Wear and tear allowances:
Class I 37.5%
Class II 30% (i) Saloons, Hatch Backs
Class III 25% and Estates
Class IV 12.5%
Industrial building allowances: Up to 1200 cc 3,600 43,200
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Industrial buildings 2.5% 1201- 1500 cc 4,200 50,400
Hotels 10 % 1501- 1750 cc 5,800 69,600
Rental house PD area 5% 1751- 2000 cc 7,200 86,400
Farm work allowances 50 % 2001- 3000 cc 8,600 103,200
Over 3000 cc 14,400 172,800
Investment deduction allowances:
2003 - 70%
2004 - 100%
2005 -to date 100% (ii) Pick-ups, Panel Vans (Unconverted)
Shipping investment deduction 40%
Mining allowance: Up to 1750 cc 3,600 43,200
Year 1 - 40% Over 1750 cc 4,200 50,400
Year 2-7 - 10% (iii) Land Rovers/ Cruisers 7,200 86,400
OR 2% of the initial capital cost of the vehicle for each month.
Commissioner’s prescribed benefit rates
Monthly rates Annual rates
Services Ksh. Ksh.
(i) Electricity (common or from generator) 1,500 18,000
(ii) Water (Communal or from a borehole) 500 6,000
(iii) Provision of furniture (1% of cost to employer)
If hired, the cost of hire should be brought to charge
(iv) Telephone (Landline and mobile phones) 30% of bills
Agriculture employees: reduced rates of benefits
(i) Water 200 2,400
(ii) Electricity 900 10,800
Other benefits:
Other benefits for example, servants, security, staff meals etc are taxable at the higher of fair market value and
actual cost to employer.
QUESTION ONE
a) Distinguish between the non-taxable income and exempt incomes giving TWO examples in each
case (4 Marks)
b) With reference to the Customs and Excise Act (Cap 472), write short notes on the following:
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i) Import declaration form (4 Marks)
ii) Clean report of findings (4 Marks)
iii) Four categories of goods liable for forfeiture to the Customs Department (4 Marks)
iv) Four privileged persons or institutions exempted from pre-shipment inspection of
imports (4 Marks)
(Total 20 Marks)
QUESTION TWO
a) In the context of the VAT Act (Cap.476), explain the meaning of the following terms:
i) Time of supply (4 Marks)
ii) Value of supply. (4 Marks)
iii) Inventory claim (2 Marks)
b) The management of Mercantile Ltd. a registered supplier of vatable goods presented the following
information relating to the company’s transactions for the six months to 30 June 2011.
Purchases Sales
Ksh ksh
January 1,740,000 2,552,000
February 2,088,000 3,132,000
March 1,972,000 2,320,000
April 1,740,000 1,044,000
May 464,000 696,000
June 2,320,000 3,016,000
The amounts stated above were inclusive of VAT at a rate of 16%
Additional information:
1. All purchases were made on cash basis while all sales were on credit basis. The cash due on
credit sales was received in the month following the month of sale.
2. Included in the sales for the month of May was ksh 200,000 for which the debtor
defaulted and was subsequently declared bankrupt on 30 June 2011.
Required:
Determine the VAT payable or refundable for each of the six months from January to June 2011
(10 Marks)
(Total 20 Marks)
4
QUESTION THREE
Delamere Ltd. practices crop and animal husbandry in the Central Rift Valley, rearing livestock and
growing vegetables and flowers for the local and export markets.
For the year ended 31 December 2011, the following profit and loss account has been prepared:
Income Sh. Sh.
Sale of horticultural products
Sale of livestock
Gain on sale of old tractor
Expenditure:
Packaging materials
Insecticides
Fertilizers
Dairy meal
Purchase of hay
Veterinary services
Professional fees
Depreciation:
Machinery
Vehicle
Subscriptions paid
Repairs and maintenance
Motor vehicle running costs
Interest on loan
Salaries and wages
General expenses
Net profit
4,000,000
3,250,000
21,500
276,000
250,000
576,250
225,750
300,000
325,750
237,500
62,500
222,500
26,250
582,500
700,000
202,500
2,070,000
135,250
7,271,500
6,192,750
1,078,750
Additional information:
1. Repairs and maintenance comprise:
Repairs to machinery
Sh.
145,000
5
Provision for fencing expenditure
Repairs to building
Repairs to irrigation system
100,000
237,500
100,000
582,500
2. General expenses comprise:
Staff medical expenses
Staff Christmas party
Decrease is specific bad debts provision
Increase in general bad debts provision
Sh.
24,000
81,250
(20,000)
50,000
135,250
3. Subscriptions comprise:
Donations to children’s home
Membership fees of Horticultural Association
Donations to district schools fund raising
Membership fees of Agricultural Society
Sh.
5,000
3,750
7,500
10,000
26,250
4. Professional fees comprise:
Architects fees on proposed farm works
Farm valuation fees
Audit fees
Sh.
137,500
25,000
75,000
237,500
Required:
a) Adjusted profit (or loss) for the year ended 31 December 2011. (13 Marks)
b) Tax payable (if any) by Delamere Ltd. (2 Marks)
(Total 15 Marks)
QUESTION FOUR
Wageni Tourist Hotel Ltd. is a five star hotel located in Mombasa. The following information relate to
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the year ended 30 September 2011:
1. As at 1 October 2010 the written down values of assets brought forward for Income Tax
purposes are as follows:
Hotel building Class I Class II Class III Class IV
Sh. Sh. Sh. Sh. Sh.
10,000,000 875,000 2,500,000 1,750,000 3,725,000
2. Disposals during the year.
Class I Class II Class III Class IV
Sh. Sh. Sh. Sh.
Cost 750,000 250,000 250,000 300,000
Net book value 325,000 75,000 90,000 100,000
Sale proceeds 900,000 125,000 200,000 90,000
Class III disposal is a private vehicle which was purchased in 2009.
3. Additions during the year:
Sh.
Computers 350,000
Fax machine 40,000
Photocopier 160,000
Beds 500,000
Mercedes Benz car 1,250,000
Hotel building 5,000,000
4. A saloon car which cost Sh.250,000 in 2009 was traded in for a new car costing Sh.400,000.
The old car was valued at Sh.200,000 and the company paid a balance of Sh.200,000. The net
book value of the old car was Sh.90,000.
5. The Old hotel building was constructed in 2008 and put into use in the same year.
Required:
a) Calculate the capital allowance due to the company for 2011. (10 Marks)
b) Show the written down values of all the assets as at 30 September 2011. Comment on Class I
balances. (5Marks)
(Total 15 Marks)

Cfm 300 Advanced Taxation Question Paper

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