Alliance Company Ltd has a profit before tax of $12 000 000 at the end of 31 December 2013, after charging /crediting the following:

$

Depreciation 240 000

Interest expense 1 000 000

Legal fees 700 000

Audit fees 500 000

Foreign travel 300 000

Bad debts 700 000

Donations 400 000

Interest income (120 000)

Additional information:

a. Legal fees are as follows:

- expenses related to an increase in share capital, $300 000

- expenses related to the recovery of bad debt $250 000.

b. Included in revenue is franked income (net) of $5 000.

c. Bad debts are advances totaling $200 000 to a salesman who had left Alliance Co. Ltd; Bilboa Ltd. a debtor of $100 000 and $400 000 is a percentage of trade debts outstanding at the end of 2013.

d. Interest payable at 31 December 2012 was $350 000 and at the end of the current year, it was $200 000.

e. Profit on disposal of non-current assets during the year was $50 000 and is included income.

f. Capital allowances are as follows:

Initial allowance $90 000

Balancing charge $60 000

g. Included in foreign travel is $130 000 for the managing director’s family.

h. Alliance paid estimated tax of $700 000 during 2013 and tax deducted at source from interest income during the year was $200 000.

Required:

Prepare Alliance Company Ltd Tax Liability for the year of assessment 2008 with necessary notes.

Answer rating: 100% (QA)

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