The following are the accounts of Mr. Wesley for the year ended 30 June 2020. Mr. Wesley is a self employed and runs his business for some years now.

The following information has been provided to you:
1. Wages and salaries include the following:
(i) Fines on PAYE for late submission of Rs. 5,000.
(ii) Contribution to superannuation fund Rs. 30,000.
(iii) There are two salespersons in the business; one of them is Mr Wesley’s wife. The latter received Rs 150,000 as salary for the year ended 30 June 2018 whereas the other salesperson was remunerated Rs. 130,000 for that same year.
2. The item Entertainment, gifts and donations is made up of the following:
(i) Staff Welfare Party Rs. 25,000
(ii) Gifts to clients Rs. 5,000
(iii) Donations to political parties Rs. 9,000

3. Included in the Legal and Profeesional fees are:
(i) legal costs to infraction of law Rs10,000
(ii) accountancy fees Rs38,000
(iii) defending Mr Wesley in connection with speeding fine 2,000
4. The interest on loan of Rs 12,500 is being paid in relation to a loan contracted by Mr Wesley from a local commercial bank. The purpose of the loan was to invest in shares of MCB Ltd.
5. 40% of the Electricity, water and telephone charges relate for the domestic consumption of Mr Wesley.
6. Mr Wesley owns a delivery van meant for the delivery of his goods and also owns a private car. The motor vehicle expenses related to the van amount to Rs 48,000.
7. Repairs and Maintenance include the following:
(i) Decorating private flat amounting to Rs 15,000.
(ii) Minor Repairs to the business premises amounting to Rs 59,000.
8. The charge for bad debts and provision for doubtful debts are made up as follows:
(i) Write off specific trade debts Rs20,000
(ii) Provision for doubftul debts Rs8,000
9. Mr Wesley took goods from the business for personal consumption. The cost price of the goods are Rs 58,000 and the selling price are Rs 72,000. Same has not been included in the reported sales of Mr Wesley.
10. During the year ended 30 June 2018, an amount of Rs 15,000 was received as recovery from bad debts previuosly written off. This amount has been ommitted from the accounts of Mr Wesley.

11. Mr Wesley is entitled to an annual allowance of Rs 168,000 for the year ended 30 June 2018.
REQUIRED
Calculate the tax adjusted profit and the tax liability of Mr Wesley for the year ended 30 June 2020, assuming that he claimed IET Category B.
 

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Rs Rs Sales 4,750,000 (1,736,000) Less Cost of sales Gross Profit 3,014,000 Other income Dividends from MCB Ltd 157,000 3,171,000 Less Expenses Wages and salaries Entertainment, gifts and donations Stationery and Consumables Legal and professional fees 470,000 39,000 45,000 112,000 Interest on loan 12,500 Electricity, water and telephone charges Rent & Rates 27,000 248,000 15,000 Licences Motor vehicle expenses Repairs and maintenance Depreciation Bad debts and provision for doubtful debts Personal income tax of Mr Wesley Total Expenses 58,000 94,000 58,000 28,000 12,000 (1,218,500) 1,952,500 Net Profit Rs Rs Sales 4,750,000 (1,736,000) Less Cost of sales Gross Profit 3,014,000 Other income Dividends from MCB Ltd 157,000 3,171,000 Less Expenses Wages and salaries Entertainment, gifts and donations Stationery and Consumables Legal and professional fees 470,000 39,000 45,000 112,000 Interest on loan 12,500 Electricity, water and telephone charges Rent & Rates 27,000 248,000 15,000 Licences Motor vehicle expenses Repairs and maintenance Depreciation Bad debts and provision for doubtful debts Personal income tax of Mr Wesley Total Expenses 58,000 94,000 58,000 28,000 12,000 (1,218,500) 1,952,500 Net Profit

Answer rating: 100% (QA)

Tax adjusted profit Rs 1952500 Rs 5000 Rs 30000 Rs 2000 Rs 15000 Rs 58000 Rs 1986500 Tax liability R... View the full answer