Archie Marvel and his close friend Hulk Mattel have started their own private detective agency, Avengers...

Transcribed Image Text:

Archie Marvel and his close friend Hulk Mattel have started their own private detective agency, Avengers Inc. on the 1st October 2021. Previously, they were employed by separate employers. Archie was retrenched from his employer due to the economic recession; his last working day was 31 August 2021. His basic salary was N$18 000 per month. PAYE deducted for that period amounts to N$4 500 per month. He also received a lump sum from his employer of N$310 000 as a token of appreciation for 5 years of loyal service by Archie. Hulk resigned from his employment with a last working day on the 30 September 2021 when Archie came with the idea of creating this partnership. Hulk received a total salary of N$120 000 from his previous employer; PAYE deducted was N$13 650. He received a lump sum of N$35 000 from the employer for services for the last 3 years of loyal service. Archie and Hulk agreed that they will share profit and losses in the ration 60:40. The following information of Avengers Inc. relates to the 2022 year of assessment: Amount N$ Income Investigating fees Expenditure Surveillance costs (note 1) Advertising Interest (note 2) Insurance (note 3) Legal expenses (note 4) Lease rentals (note 5) Bank charges Cleaning charges Other deductible expenses Salary: Archie Marvel Salary: Hulk Mattel 350 000 45 000 5000 8.000 16 000 5.000 30 000 1 200 200 2 5500 75 000 65 000 Notes: 1. Surveillance costs consists of the following: 2 New Equipment (Bought in 40 000 Namibia) Maintenance of surveillance 5 000 equipment 45 000 . Interest on Archie's personal credit card N$ 500 • Interest on Avengers Inc. business account overdraft N$7 500 3. Included in the insurance expense is Hulk's personal short term insurance of N$3 500 as he can get a better rate through the partnership. 4. Legal expenses of N$5 000 were for the compilation of the partnership agreement. 5. The property was obtained through a 5 year leasehold contract that was signed on the 1 October 2021. Included in the N$30 000 expense: • Monthly rental payment of N$5 000 • Refundable deposit of N$5 000 Required: a) You are required to calculate the 2022 taxable income of Archie and Hulk.. take the option where he will pay the least amount of tax in the 2022 year of assessment. Start your answer with the net profit. You must indicate the reason for each adjustment that is made to the net profit to earn a mark for the adjustment. (24 Marks) b) Calculate the tax payable to the Receiver of Revenue by Archie and Hulk for the 2022 year of assessment. (6 Marks) Archie Marvel and his close friend Hulk Mattel have started their own private detective agency, Avengers Inc. on the 1st October 2021. Previously, they were employed by separate employers. Archie was retrenched from his employer due to the economic recession; his last working day was 31 August 2021. His basic salary was N$18 000 per month. PAYE deducted for that period amounts to N$4 500 per month. He also received a lump sum from his employer of N$310 000 as a token of appreciation for 5 years of loyal service by Archie. Hulk resigned from his employment with a last working day on the 30 September 2021 when Archie came with the idea of creating this partnership. Hulk received a total salary of N$120 000 from his previous employer; PAYE deducted was N$13 650. He received a lump sum of N$35 000 from the employer for services for the last 3 years of loyal service. Archie and Hulk agreed that they will share profit and losses in the ration 60:40. The following information of Avengers Inc. relates to the 2022 year of assessment: Amount N$ Income Investigating fees Expenditure Surveillance costs (note 1) Advertising Interest (note 2) Insurance (note 3) Legal expenses (note 4) Lease rentals (note 5) Bank charges Cleaning charges Other deductible expenses Salary: Archie Marvel Salary: Hulk Mattel 350 000 45 000 5000 8.000 16 000 5.000 30 000 1 200 200 2 5500 75 000 65 000 Notes: 1. Surveillance costs consists of the following: 2 New Equipment (Bought in 40 000 Namibia) Maintenance of surveillance 5 000 equipment 45 000 . Interest on Archie's personal credit card N$ 500 • Interest on Avengers Inc. business account overdraft N$7 500 3. Included in the insurance expense is Hulk's personal short term insurance of N$3 500 as he can get a better rate through the partnership. 4. Legal expenses of N$5 000 were for the compilation of the partnership agreement. 5. The property was obtained through a 5 year leasehold contract that was signed on the 1 October 2021. Included in the N$30 000 expense: • Monthly rental payment of N$5 000 • Refundable deposit of N$5 000 Required: a) You are required to calculate the 2022 taxable income of Archie and Hulk.. take the option where he will pay the least amount of tax in the 2022 year of assessment. Start your answer with the net profit. You must indicate the reason for each adjustment that is made to the net profit to earn a mark for the adjustment. (24 Marks) b) Calculate the tax payable to the Receiver of Revenue by Archie and Hulk for the 2022 year of assessment. (6 Marks)