Johnson and Starmer have been in partnership as political lobbyists for many years. The partnership income statement
Question:
Johnson and Starmer have been in partnership as political lobbyists for many years. The partnership income statement for the year ended 31 March 2021 is detailed below:-
££ Notes |
Gross trading profit 250,000 |
Add: other income |
Client gratuity for a job well done 1,000 |
Bank interest received 30 |
251,030 |
Less: Expenses |
Manpower costs 96,800 1 |
Office expenses 8,270 |
Communication costs 4,000 2 |
General expenses 10,100 3 |
Professional fees 3,750 4 |
Motor and travelling 15,550 5 |
Provision for bad debts 2,000 6 |
Insurances 6,000 |
Depreciation 5,100 151,570 |
Net profit for the year 99,460 |
Notes
1. Manpower costs included payments to the partners’ spouses. Each spouse was paid £5,000 for duties that had a commercial value of £7,500.
2. Communication costs include £3,100 for office phones and £900 for the partners’ home telephone costs. It is estimated that the home telephones are used 25% privately.
3. General expenses includes: Entertaining customers (£1,200), entertaining staff (£900), and a fine (£2,000) for a Data Protection Breach.
4. Professional fees are: legal fees for the renewal of the 10 year office lease (£1,000) and a payment of £2,750 to the firm’s accountants for the preparation of the annual accounts.
5. Motor and travelling includes £4,000 and £3,000 respectively in respect of Johnson’s and Starmer’s total car expenses. The total miles and business miles for each of the partner’s cars for the accounting year were Johnson: 12,000 and 6,000 and Starmer: 10,000 and 7,000. The rental costs of a leased car used by an employee were also included. The car had CO2 emissions of 175 g/km and the leased costs for the year were £3,200.
6. The provision for bad debts includes a customers bad debt written off when the customer became bankrupt £2,500 and the recovery of part of a bad debt (£500) written of in the accounts two year’s ago that was received this year by the partnership.
7. Capital allowances of £ 2,000 have been calculated as due for the year.
Required
Calculate Johnson and Starmers’s taxable profits (start with the net profit figure of £99,460 and include adjustment entries for notes 1 to 7 showing a zero (0) if no adjustment is required).
