Fundamentals Of Taxation Question Paper

Fundamentals Of Taxation

Course:Bachelor Of Commerce

Institution: Kenyatta University question papers

Exam Year:2010

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2009/2010
SECOND SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR
OF COMMERCE

BAC 304:
FUNDAMENTALS OF TAXATION

DATE: Thursday, 15th April, 2010
TIME: 11.00 a.m. – 1.00 p.m.
------------------------------------------------------------------------------------------------------------
INSTRUCTIONS:
? Answer ALL questions.
? Time Allowed:
? Show your workings clearly
? Marks allocated are shown at the end of each question.

Question One
Grace, Leah and Janet are partners, operating a supermarket in Nakuru town. They share
profits and Losses in the ratio 2 : 2 : 1 respectively. During the year ended 31/12/2009,
the partners reported a loss of Kshs 4,425,000 after deducting the following:

Kshs. 000
Interest on Capital:

Grace

232

Leah

232

Janet

348

Page 1 of 6

Salaries to Partners:

Grace

400

Leah

420

Janet

576
Motor vehicle running expenses

304
Repairs and Maintenance

96
Office expenses

240
Goodwill

400
Loss on Investment

600
Postage and Telephone

170
Water and Electricity

136
Subscriptions to Kenya National Chamber of Commerce
128
Salaries and Wages

712
Donations

300
Bad debts written off

346
Rent, Rates and Licences

160
Professional fees

960
Depreciation

1,760
Purchase of Lorry

1,331
Dividends Received (Net)
264
Insurance Recovery on Motor Vehicles

520
Notes:
i)
Office expenses included cost of office cabinet of Kshs. 110,000.
ii)
Traveling expenses amount to Kshs. 12,000 per month related to personal use
iii)
Leah had taken goods worth Ksh.70,000 for her own use.
iv)
Included in repairs and maintenance is Kshs.80,000 paid for office partitions.
v)
Wear and Tear Allowances agreed with the commissioner amounted to
Kshs.706,000.
vi)
The provision for bad and doubtful debts account for the year appeared as
follows:-

Page 2 of 6

Kshs. 000

Kshs. 000

Bad debts

246

Balance b/f

Balance c/d:

General

330

Specific
192

Specific

152

General
390

Profits and Loss Account
346

828

828

===

===

Required:
a)
Taxable Profit (Loss) of the Partnership for the year ending 31/12/2009

(12 marks)
b)
Show the distribution among the Partners

(8 marks)

Question Two
a)
List and explain any three deductions that may be available against gains or
profits from employment.

(3 marks)
b)
Mr. Gitahi has approached you with a vies to obtaining help in determining his
taxable income for 2009. He has supplied the following information:-

i)
He runs a small garage that generated taxable income of Kshs.60,000. In
2008, he had a taxable loss of Kshs.40,000 from this business.

ii)
His wife was employed by Thika Limited as the Finance Director. Her
salary was Ksh.52,000 per month. Additional benefits include:
- company car 1,800 cc
- House at Kahawa Wendani (market value of rent Kshs.20,000 per
month)
- Staff gifts of oil products worth Kshs.1,000 per month.
iii)
In the course of the year, Gitahi sold one plot he owned in Nairobi, for
Kshs.1,200,000. This represented a gain of Kshs.600,000 which they used
to take a holiday to Mombasa.

iv)
Gitahi also had the following investment income:

Page 3 of 6

Withholding Tax

Net

Kshs.

Kshs.

Dividends:-

EABL

2,000

18,600

HFCK Limited

1,000

9,000

C.M.C. Limited

4,000

36,000

Interests:

KCB Savings Account
2,000

18,000

HFCK – Housing Development

Bond

7,000

63,000

Post Office Savings Bank

20,000

15% 2015 Treasury Bonds
1,500

13,500

v)
Mr. Gitahi is employed by Kahuho Limited as the general manager –
sales. His salary was Kshs. 40,000 per month and a bonus of 2% on total
sales revenue. He had a car of 2000 cc which he used to visit customers
otherwise his wife would pick and drop him at the place of work each day
using her official car.

vi)
Kahuho Limited insures all its sales against default customers. The cost
of the insurance was Kshs.10,000 which represents 0.001 percent of sales.
The company also paid Kshs.20,000 to cover the household items of
Gitahi.

vii)
PAYE of Kshs. 130,000 was deducted from Gitahi’s pay. Due to an
oversight in the part of the chief accountant the tax was not paid to KRA.
His wife’s PAYE was Kshs.180,000 in the year.
Required:
i)
Compute the total income chargeable to tax and the tax there due
for Mr. Gitahi.

(8 marks)

ii)
Comment on any information not used for computing taxable
income above.

(2 marks)

iii)
Is Gitahi to blame for failure of the company to pay his PAYE?
Explain.

(2 marks)

📘 Access 10,000+ CBC Exams With Marking Schemes

Fundamentals Of Taxation Question Paper

More Question Papers

Exams With Marking Schemes

End Term 3 Exams

Mid Term Exams

End Term 1 Exams

Opener Exams

Full Set Exams