Milungu Plc is a manufacturing company listed on the Lusaka stock Exchange $($LUSE$).$ The company; which has been trading for many years, prepares accounts to $31$st December each year.

During the year ended $31$st December $2023,$ the company had the following

results: K$\text{'}000$ K$\text{'}000$

Gross Trading Profit $-1,990,780$

Dividends Received $($Net$)$ from Lukupa $($Z$)$ Ltd $-221,340$

Discount Received $-3,650$

Bank Interest Received from Luombe$($Z$)$ Bank ltd $($Gross$)-136,800$

Debenture Interest Received from Kateshi Plc $($Net$)-40,630$

Profit on Disposal of Motor Van $($Note $1)-5,830$

Less: Expenses

Salaries & Wages $($Note $2)-506,490$

Canteen Expenses $-214,270$

Depreciation $-149,050$

Legal Expenses $($Note $3)-22,860$

Bad Debts $($Note $4)-8,630$

Repairs and maintenance $($Notes $5)-94,780$

Advertising $($Note $6)-58,720$

Entertainment and Gifts $($Note $7)-50,640$

Loss on Disposal of Equipment $($Note $8)-2,750$

General expenses $($Note $9)-357,260$

Provision for taxation $($Note $10)-180,000$

Dividends Paid $($Note $11)-42,000$

Transfer to General Reserve $-100,000$

Net Profit $-(1,787,450)$

$-611,580$

Notes:

$1.$Profits on Sales of Motor Van

The company sold a motor Van for K$12,800000$ on $18$th February $2023.$ The Van sold was a Toyota Hilux that had been acquired for Kl $9,245,000$ in July $2018.$

$2.$Salaries and Wages $-$ K$\text{'}000$

Directors emoluments $-150,610$

Salaries & Wages for their employees $-212,080$

Theft of money by the Director of Finance who has since been suspended $-40,000$

NAPSA Contributions for employees $-$

$32,420$

PAYE deductions for employees paid to ZRA $-65,650$

Penalty for late remittance of NAPSA Contributions $-5,730$

$-506,490$

$3.$Legal Expenses

$$Drafting employees' service contracts $-2,680$

$$Recovery of loan from former employees $-3,400$

$$Breach of Environmental Council of Zambia regulations in disposing

of industrial waste $-5,890$

$$Defending action in alleged faulty Goods $-4,120$

$$Legal Fees in connection with issue of shares to increase the company's share capital $-3,950$

$$Legal fees in connection with the issue of Debentures $-2,820$

$-22,860$

$4.$ BAD DEBTS ACCOUNT

Bad Debts Account $-$ K'OOO K'OOO

Trade debts written off $-5,710$ balance b$/$f:

Loans to employee written off $-9,000$ General provision $4,860$ off

Specific provision $-5,990$

Balance C$/$F:

Bad debts recovered $-3,690$

General Provision

$3,940$ Loan to employee recovered $-2,000$

Special provision

$6,520$ Profit and Loss Account $-8,630$

$25,17025,170$

$5.$Repairs & Maintenance: K'OOO

Replacement of broken office window panes $-5,040$

Office Partitioning and painting $-3,970$

Redecorating offices $-4,340$

Replacement of Floor Tiles $-31,290$

Rebuilding part of wall fence which collapsed due to heavy rainfall $-12,080$

InitiaI repairs of a recently acquired second hand Mitsubishi Truck $-23,450$

Decorating Company premises $-5,760$

Clearing the recently acquired land for the construction of new factory $-8,940$

$-94,870$

$6.$Advertising: $-$ K'OOO

Adverts on National Television $-15,700$

Bill Boards $-10,020$

Adverts in a local Newspaper $-8,950$

Gifts of $200,000$ calendars to customers carrying Company Name $-4,930$

Mounting Neon Signs $-19,120$

$-58,720.$

$7.$Entertainment & Gifts: $-$ K'OOO

Entertaining special foreign suppliers $-18,360$

Staff Christmas party $-11,110$

Entertaining prominent customers $-13,930$

Gifts of Foodstuffs & drinks to potential customers $-7,240$

$-50,640$

$8.$Loss on Disposal of Equipment:

The company sold some of its computers on auction sale for Kl$3,800,000$ on $31$st October $2023.$ The original cost of the computers sold was K$26,500,000$ acquired in May $2016.$

The loss on disposal was charged to the profit and loss Account.

$9.$General Expenses: $-$ K'OOO

General cleaning expenses $-96,740$

Cost of training employees $-120,830$

Penalty for late remittance of $-590$ Company Income Tax Return $-1,250$

Parking fines on company vehicles $-680$

Penalty for late VAT Return $-137,170$

Sundry allowable expenses $-357,260.$

$10.$Provision for taxation:

This is based on the Total Company Income Tax paid in respect of the year ended $31$st December $2022.$ The amount of company tax already paid under the provisional system of paying tax for the year ended $31$st December $2023$ is K$198,200,000.$

$11.$ On $1$st October $2023,$ Milungu plc paid a dividend of K$282$ Million. The K$282,000,000$ is the gross amount before deducting tax.

Additional information:

The company is Registered for VAT purposes, and the Sales, purchase and other expenses figures shown in the profit and loss account have been correctly dealt with for the Value Added Tax $($VAT$)$ purposes.

The company has employed two $(2)$ handicapped employees, a Receptionist and an Accounts Clerk.

REQUIRED:

Calculate the company' s taxable profits for the charge year $2023$ and its tax payable on the profits and dividends for the year under review.

Answer rating: 100% (QA)

To calculate Milungu Plcs taxable profits for the charge year 2023 and its tax payable on the profit... View the full answer