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Fundamentals Of Taxation Question Paper
Fundamentals Of Taxation
Course:Bachelor Of Commerce
Institution: Kenyatta University question papers
Exam Year:2009
KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2008/2009
INSTITUTE OF OPEN LEARNING (IOL)
EXAMINATION FOR THE DEGREE OF BACHELOR OF COMMERCE
BAC 304:
FUNDAMENTAL OF TAXATION
DATE: Tuesday, 11th August, 2009
TIME: 8.00 a.m. – 10.00 a.m.
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INSTRUCTIONS:
Answer ALL questions.
Question One
Highlight the factors that determine the extent to which the incidence of a tax can be
shifted from one tax payer to another.
(10 marks)
Question Two
a)
Highlight THREE advantages and TWO disadvantages of the Value Added Tax
(VAT) system.
(10 marks)
b)
Vyombo Ltd. is a leading manufacturer of kitchen appliances which are either
consumed locally or exported. During the month of February the following
transactions took place:
February
3:
Purchased goods on credit from Jiko Ltd. worth Shs. 2,040,000.
4:
Purchased stationary for use in the business on credit from Seal Honey Ltd. worth
Shs. 750,810.
6:
Sold goods worth Shs. 3,975,000 on credit to Blue Ltd.
Page 1 of 4
6:
Sold goods to Zawadi Ltd. for Shs. 2,955,300.
7:
Paid Maersk shipping line Shs. 525,000 for transporting goods purchased by
Zawadi Ltd.
9:
Blue Ltd. returned goods worth Shs. 450,000 due to some major defects.
11:
Sold goods worth Shs. 1,297,500 to Jikoni Ltd.
11:
Returned defective office stationary which had cost Shs. 76,200 to Seal Honey
Ltd.
12:
Sold goods for Shs. 1,830,000 to Rwandese Ltd., a company based in Rwanda.
14:
Goods worth Shs. 300,000 were stolen while in transit to Rwanda.
18:
Granted Shs. 30,000 allowance to Rwandese Ltd. for some minor defects on some
items.
18:
Agreed to cancel the account received from Zawadi Ltd. in exchange for services
rendered by them to the company in Western Province.
20:
Sold goods for cash amounting to Shs. 4,101,000
23:
Jikoni Ltd. was declared insolvent by the high court and a winding up order
issued.
27:
Telephone and electricity bills for the month were received. The VAT on the
telephone and electricity bills was Shs. 450,000 and Shs.26,250 respectively.
Where applicable prices and payments made are VAT inclusive
Required:
The VAT account for Vyombo Ltd. for the month of February 2009.
(10 marks)
(Total 20 marks)
Question Three
Mawingu Ltd is a registered company which started its business on 1.1.2007, The
directors have provided the following information
1.
On 1.1.2007, the company incurred the following costs in the purchase and
construction of land and buildings respectively:
Page 2 of 4
Shs.
Factory
Construction
8,000,000
Cost
of
Land
2,000,000
Staff canteen
900,000
2.
Machinery worth Shs. 7 million were purchased in January 2007 and installed in
the factory.
3.
Furniture and fittings were done at a cost of Shs. 4,800,000
4.
After operating for one year the company undertook the following on 1 April
Year 2008,
i)
Computerized the administration department at a cost Shs. 2.8 million.
ii)
Two five tones lorries were purchased at a cost of Shs. 5 million each.
iii)
A new sports pavilion for staff welfare and recreation was purchased at
Shs. 5.8 million.
iv)
Two Toyota Avensis vehicles for sales representatives were purchased at a
total cost of Shs.5 million.
5.
Other assets purchased and disposed during the year 2008 were:
Purchases
Shs.
Water-pump
200,000
Photo-copier
550,000
Delivery van 1,800,000
Forklift
1,500,000
Fax machines 600,000
Heating plant 500,000
Disposals
Furniture 460,000
Computers
200,000
Page 3 of 4
Determine the capital allowances due to Mawingu Ltd. for the years ended 31
December
2007
and
2008
(20
marks)
Question Four
Briefly describe the following taxes
i)
Stamp duty
(4 marks)
ii)
Cess
(4 marks)
iii)
Withholding
tax (4
marks)
iv)
Instalment tax
(4 marks)
v)
Turnover
tax
(4
marks)
(Total 20 marks)
Page 4 of 4
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