Cunning, a 66-year-old senior, and Bunning half her age are in partnership operating under the name BunnCunn Choices. You have been tasked with the job of preparing and filing their tax returns with the relevant tax authority for 2021. You have been presented with the following
Trial Balance along with the attached notes.
1. Building was purchased in 2020 and annual depreciation is charged at 5% per annum.
2. Bunning is a salaried partner who does not share in profits. Included in salaries is $3m paid to him for the year.
3. The amount for Bad debts is estimated based on debtors' balance
4. Breakdown for Donations reflects $80,000 to UTECH and $10,000 to an unregistered football club unknown to TAJ, the balance was to TAJ’s approved clubs.
5. Travelling expenses relate to costs incurred in traveling by Partner Bunning to negotiate a critical business deal. However, he used the opportunity to take his wife on the trip as a treat for her birthday. Costs relating to having his wife on the trip are $40,000.
6. Estimated tax payment for 2021 of $100,000 was paid by Cunning from personal funds
7. 50% of the amounts paid for legal fees related to the cost of protecting the business reputation, and the other 5% was for the cost of acquiring fixed assets.
Note: Assume NIS rate of 3% and ceiling of J$3m throughout the year 2021.

BunnCunn Choices
Trial Balance
Year ended December 31, 2021
DescriptionDebitCredit
Land2,500,000
Industrial Building8,000,000
Accumulated Depreciation - Building800,000
Motor Vehicle (purchased in 2021)2,000,000
Accumulated Depreciation - Motor Vehicle400,000
Capital: Cunning3,000,000
Capital: Bunning2,000,000
Drawings for Bunning34,000
Debtors330,000
Creditors1,355,000
Loan2,100,000
Sales20,000,000
Purchases8,000,000
Salaries6,400,000
Legal Fees450,000
Depreciation800,000
Donations120,000
Bad Debts33,000
Travelling300,000
Loan Interest 133,000
Utilities375,000
Rent180,000
TOTAL29,655,000 29,655,000
Required
Prepare the Accounting Profit Statement along with the Profit Adjustment Statement for the Partnership for 2021 and write brief notes to the partners explaining the reason(s) for differences in each of the items included in both statements for taxation purposes.

Answer rating: 100% (QA)

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