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Cfm 100: Introduction To Taxation Question Paper

Cfm 100: Introduction To Taxation

Course:Bachelor Of Commerce

Institution: Kca University question papers

Exam Year:2009

1
UNIVERSITY EXAMINATIONS: 2008/2009
FIRST YEAR STAGE 1 EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE
CFM 100: INTRODUCTION TO TAXATION (SATURDAY)
DATE: APRIL 2009 TIME: 2 HOURS
INSTRUCTIONS: Answer ALL questions
QUESTION ONE
a) Define the following terms.
i. Impact of a tax (2 Marks)
ii. Incidence of a tax (2 Marks)
iii. Tax point of VAT purposes (1 Marks)
b) Mr. P. Pagwa is a sales manager with Jambo Milers Ltd. the following information relates to his
income for the year ended 31 December 2008:
1. Basic pay Shs 960,000 per annum (PAYE Shs 120,000 per annum)
2. He was provided with a house leased by the employer at Shs 50,000 per month. He
contributes 3% of his basic pay towards the house rent.
3. On 1 July 2008, he was provided with a loan by the employer amounting to Shs
4,200,000 at an interest rate of 4% per annum to enable him purchase a residential
house. He moved to the new house on 1 August 2008.
4. He is a member of a registered pension scheme. During the year, he contributed Shs
180,000 to the scheme while the employer contributed an equal amount.
5. He operates a canteen which is located within the employer’s premises. The employer
deducts Shs 2,500 per month as rent for the canteen, although the market rental value is
Shs 8,000 per month. The canteen reported a taxable profit of Shs 120,000 for the year
ended 31 December 2008.
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6. He is provided with a motor vehicle (2000 cc) for both official and private use. On
average three quarters of the motor vehicle usage is for official purposes. The motor
vehicle cost Shs 1,600,000 in year 2005 but was valued at Shs 1,000,000 as at 31
December 2008.
7. During the year the employer paid the following bills for him.
Shs
?? School fees (expensed in the company’s books) 80,000
?? Telephone bills 30,000
?? Grocery bills 12,000
?? watchman’s wages 36,000
8. During the year, the employer contributed Shs 20,000 for him to Mali Golf Club.
9. He is married with three children. The life assurance premium for himself and family
amounting to Shs 22,000 per annum were paid by the employer during the year.
10. He also owns a farm which reported a loss of Shs 80,000 for the year ended 31
December 2007. He estimates that five per cent of the farm output is consumed by his
family.
Required:
(i) The taxable income of Mr. P. Pagwa for the year ended 31 December 2008
(20 Marks)
QUESTION TWO
Kindole and Pete are partners in a wholesale business. For the year ended 31 December 2008 the
partners made a loss of Shs.2,334,000 after crediting and debiting the following balances:
Sales 24,600,000
Profit on sale of shares ex-dividend 760,000
Dividend on shares received 40,000
Bad debts recovered 85,000
Value added Tax on purchases 16,300,000
Medical expenses for partners 1,100,000
Salaries and wages including partners 1,200,000
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Rent: rates and taxes 1,250,000
Fire insurance 460,000
Partners household expenses 62,000
Advertisement 420,000
Legal and professional fees 42,000
Accountancy and audit 210,000
Stationery and postage 65,000
Income tax for 2004 110,000
Purchase of machinery 1,200,000
Depreciation 1,800,000
Reserve for bad debts 230,000
Additional information was provided as follows:
1. legal fees represents:
- shs.25,000 for renewal of 50 year lease.
- Shs.18,000 for appeal to VAT Tribunal.
- Shs.55,000 for defending partner against a private matter.
- Shs.25,000 for debt collection
- Shs.87,000 for handling customer complaints.
2. Advertisement includes shs.20,000 used in promoting sales through Radio Uganda for
promoting sales in Uganda.
3. Sales include a charge at market value of shs.120,000 of goods used by partner’s families. The
goods had cost shs.90,000.
4. Capital allowances have been agreed at shs.1,350,000.
The partners share profit and losses equally and each drew shs.200,000 as salary during the year.
Required
a) Compute trading profit or loss of the partnership for tax purposes for the year of income 2008.
(20 Marks)
b) Show allocation between partners. (5 Marks)
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QUESTION THREE
a) What are the rights of a registered person for VAT? (5 Marks)
b) Mr. Mrefu a registered VAT consultant made the following transactions in March 2008:
Shs.
?? Gave a gift to his local church in form of free service valued at 250,000
?? Purchased a Pajero (VAT inclusive) 1,500,000
?? Raised invoices amounting to 1,000,000
?? Issued a credit note 25,000
?? Incurred other input tax (20% related non-taxable supplies) 250,000
Required
A VAT account for the month of March 2008. (10 Marks)
c) Give five circumstances under which VAT penalties may be imposed on a registered person.
(5 Marks)
d) Explain the term pre-shipment inspection.
List four types of goods which are exempt from pre-shipment inspection. (5 Marks)
QUESTION FOUR
a) Explain how the incomes of the following persons are assessed for tax.
i) Incapacitated persons (3 Mark)
ii) Non residence person (3 Mark)
b) List four non taxable benefits an employee may receive from the employer. (4 Marks)
c) Explain the treatment of the following for tax purposes.
i) Dividend income
ii) Interest income
iii) Pension contribution by an employee to a registered pension scheme
iv) Wife’s professional income
v) Medical allowance paid by the employer.
(10 Marks)
d) Name five main cannon of an ideal tax system. (5 Marks)

Cfm 100: Introduction To Taxation Question Paper

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