Irene and Joel had been in partnership business for several years as supplying imported drinks. Below was extracted from their final account submitted for tax purposes for the year ended 31st Dec 2009.

Gross profit............................................................731,000

Add other incomes:

Rent ...........................................................................9,000

Dividend .................................................................40,000

Interest on T’bills 120,000...................................169,000

................................................................................900,000

Less expenses:

Loss on sale of assets ......................................10,000

Donation ............................................................4,000

Bad debt ............................................................30,000

Depreciation........................................................80,000

Damage goods written off ...................................2,300

Income tax appeal................................................10,000

Interest on capital..................................................48,000

Medical treatment .................................................11,000

Salaries of partners..................................................21,000

Cost of patent right...................................................15,000

Entertainment ...........................................................20,000

Overseas trip...........................................................11,200

Motor expenses .17,000 .....................................279,500

Net Profit................................................................800,000

Notes:

i. During the year under review, the firm supplied goods to their customers amounting to GHS1,500,000 and the withholding taxes paid on their behalf has accumulated to a tune of GHS9,000 and all certificate pertaining to the withholding taxes has been duly provided.

ii. Only 25% of the bad debt is a specific debt incurred during the year, whereas, the remaining 75% was for provision for doubtful debt

iii. The partners decided to share profit 40%, 60% respectively.

iv. Assume a capital allowance of GHS90, 000 granted to the partnership business during the year.

v. Donation is made up as follows: Osu childrens home GHC1,500, Church harvest GHC2,500

vi. Entertainment is in respect of Irene’s daughter birthday party

vii. Overseas trip was a trip made for Joel’s private work

viii. The total mileage made for the running of the motor was 210,000km which Joel run 92,000km out of the total mileage for her private rounds

ix. The medical treatment was made for Irene’s daughter who had a cervical cancer

x. Salaries of partners: Irene – GHC11,000 and Joel – GHC10,000.

xi. Interest on capital: Irene – GHC18,000 and Joel – GHC30,000

Required:

From the above information, determine the net tax liability payable by each partner.

Answer rating: 100% (QA)

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